No Claim Bonus in Car Insurance: How It Works in India

Business Wire India

When it comes to car insurance, many insurers have introduced multiple attractive features in their policies to ensure that every car is insured. No Claim Bonus (NCB) is a feature or reward that allows car owners to make considerable savings on their insurance premiums.

Therefore, understanding the role of NCB in car insurance is necessary for every vehicle owner. Whether you are buying a car insurance policy or transferring plans, a complete knowledge of NCB will help you save money and make informed choices.

What is No Claim Bonus or NCB in Car Insurance?

No Claim Bonus (NCB) is basically a reward that your insurer provides you for maintaining a claim-free policy year. It means that if you do not file an insurance claim during a policy year, you will receive a discount at the next insurance renewal.

NCB in car insurance starts at 20% and can go up to 50%. The discount is applied to your insurance premium at renewal, and you can also transfer NCB when buying a new car.

How Does No Claim Bonus Work in Car Insurance?

NCB in car insurance starts accumulating in the very first year if you can keep it claim-free. The discount increases when you maintain consecutive claim-free years. For instance, your insurer may provide a 20% discount on the first insurance renewal if you have maintained a claim-free year.

If you maintain zero claims for about 5 consecutive years, your discount can be 50%. The discount range may differ slightly from one insurance provider to another. So, you can use a no-claim bonus calculator from your insurer’s website to calculate your accumulated NCB in car insurance.

Every car owner must know how to check their accumulated NCB over the years, as it can influence their decision to make a claim. If there are minor repairs, you can pay for them out of pocket to preserve the NCB for future use.

What are the Benefits of No Claim Bonus in Car Insurance?

Here are some of the car insurance NCB benefits that every car owner should know:
 

• Offers a Reward for Car Maintenance

  If you are a responsible driver, you will definitely keep your car well-maintained, which means you will make fewer claims. With NCB, you will receive a discount on your insurance renewal as a reward for car maintenance.

  As it clearly links driving behaviour to potential savings on car insurance with a no-claim bonus, it seems appealing.
   

• Huge Savings on Insurance Premiums

  The accumulated NCB over the years can reduce your insurance premium by a considerable amount. With every claim-free year, you save more, affecting your budget significantly over time.
   

• Does Not Related to Your Car, But You

  The discount and benefits of NCB in car insurance are not linked to your vehicle; they are entirely related to you, the car owner. So, even if you change the car, you will be able to redeem the discounts of your accumulated NCB, regardless of the car you own.
   

• Allows NCB Transfer

  You can even transfer the accumulated NCB from one insurer to another, in case you wish to switch the car insurance policy to a new company. All you need to do is obtain a certificate from your previous insurer and provide it to your new insurer.

  This feature allows you to switch car insurance policies between insurers without compromising your accrued insurance benefits. It also highlights why researching car insurance online is so important. Comparing plans helps you find better premiums, wider coverage, and more value before you make the move.
   

How to Calculate NCB in Car Insurance?

The NCB calculation is based on your car insurance premium. It starts in the second year if you have managed to go claim-free in the first year. Usually, you will get a 20% discount on car insurance premiums from the second year.

With each consecutive year of zero claims, your discount will increase. NCB is applicable only for the own-damage component of your insurance premium, so it is not provided in third-party car insurance.

Here's a chart to represent the NCB discount rate of a car over the years:

Let’s take an example for better understanding:

Mr Kumar pays Rs. 20,000 as his car insurance premium, of which Rs. 18,000 is the own damage component. He has maintained zero claims for 5 consecutive years. After 5 years, he can get a 50% discount on this insurance premium, saving him Rs. 9,000.

How to Transfer No Claim Bonus to a New Car Insurance?

Here are the steps to follow while transferring your No Claim Bonus to a new insurance:

• Step 1: Inform the previous insurance company that you plan to purchase a new policy.
• Step 2: Provide all the necessary documents so that your existing insurance provider can transfer the NCB protection.
• Step 3: After reviewing and verifying the documents, your existing insurer will provide you with an NCB protection certificate.
• Step 4: After collecting the NCB certificate, you need to submit it to the new insurer so that they can transfer your accumulated No Claim Bonus.
• Step 5: You can also provide a declaration to the new company regarding your NC rate and claim-free years, in case you cannot share the NCB certificate. However, if it is proven false, you may lose policy benefits.
   

Things You Should Know about NCB in Car Insurance

Here are some crucial points that you should know about NCB in car insurance:

• NCB Reduces Your Damage Premium

  You can earn a maximum NCB of 50% after maintaining zero claims for five consecutive years. If you have reached the 50% limit, you cannot claim any higher discount rate even after going claimless for another year.
   

• NCB is not Applicable to your Entire Car Insurance Premium

  You should know that NCB is not applicable to third-party car insurance, as it covers only third-party losses and damages. NCB only applies to the own damage premium of your comprehensive car insurance policy.
   

• NCB is Transferrable

  The NCB can be transferred to a new vehicle you purchase.  On the other hand, your new vehicle must be in the same tariff class as the vehicle for which the NCB was obtained.

  Additionally, remember that unless the car owner passes away and the vehicle is given to a legitimate heir, NCB cannot be transferred to another individual.  The legitimate successor must receive the NCB within 90 days.
   

• Avoid Incorrect NCB Declaration

  If you declare an incorrect NCB amount when claiming the discount, it can result in claim rejection and loss of insurance benefits. So, be careful not to declare any incorrect information to your insurance provider.

  NCB in car insurance helps reduce your car insurance premium while encouraging vehicle owners to adopt safe driving habits. Thus, every car owner must understand all the components of a No Claim Bonus and utilise it accordingly. It will help you make considerable savings on insurance renewal.

Disclaimer: The above press release comes to you under an arrangement with Business Wire India. Business Upturn takes no editorial responsibility for the same.