No Claim Bonus (NCB) in Car Insurance

No Claim Bonus (NCB) is a reward, given by an insurer to a policyholder for making no claims during the policy term. No Claim Bonus can be accumulated as a discount on the premiums over years. NCB discount ranges from 20% to 50% on the own damage premium. No Claim Bonus (NCB) can be claimed even if someone changes its vehicle, as it is transferable to the new vehicle bought by the policyholder.

NCB Full Form in Car Insurance

The full form of NCB is No Claim Bonus. It refers to a reward granted to car owners by motor insurance companies if they do not register any claim during the policy tenure. The reward consists of a discount on the car insurance premium that can be applied at the time of policy renewal next year.

Benefits of NCB in Car Insurance

The No Claim Bonus provides several benefits to vehicle owners under a car insurance policy. Take a look:

• Lower Premiums - The No Claim Bonus helps a policyholder to earn at least 20% discount on his car insurance premium. For every claim-free year, the NCB discount percentage is granted to the policyholder. This discount can be used to reduce the premium amount that he is supposed to pay at the time of renewing his car insurance.
• Earn Rewards - No Claim Bonus is considered as proof of being a responsible driver and maintaining a good condition of the insured car. Thus, the policyholder can earn rewards in the form of NCB by not making any claims during his previous policy tenure.
• Granted to Policyholders - A big takeaway from NCB is that it is granted to the policyholder/ car owner and not the car. Therefore, whether he buys a new car or sell his insured car, the NCB remains with him as long as he is renewing car insurance policies. It cannot be transferred to the new owner of the car.
• Transferable to Another Car/ Insurer - The No Claim Bonus can be easily transferred to another car if the policyholder changes his car. Moreover, it can also be transferred from one insurer to another if the car owner decides to buy insurance from another motor insurance company.

How to Transfer NCB to New Car Insurance?

The process of transferring the No Claim Bonus to a new car insurance policy is extremely easy. However, the procedure varies if the car owner plans to buy new car insurance online, offline or through an agent.

In case of buying new car insurance online, all the car owner needs to do is inform the new insurance company about the correct NCB, name of his previous motor insurance provider and his old policy number to get his NCB transferred. The insurance company will automatically transfer the NCB from the old insurer to the current car insurance policy.

If the car owner wants to buy new car insurance offline or through an agent, he needs to follow the steps the given below to transfer his No Claim Bonus:

• Contact your old motor insurance provider
• Request for NCB transfer and submit all the required documents
• The insurance company will issue the NCB Certificate
• Submit the NCB Certificate to the new insurance company
• The new insurance insurer will transfer the NCB

Documents Required for Transferring NCB

The policyholder needs to submit the following documents to the insurance company to get his No Claim Bonus transferred:

• Transfer application
• Photocopy of the car insurance
• Buyer-seller agreement (Forms 29 & 30)
• Copy of transferring old registration certificate/ ownership transfer certificate (in case of sale of old car)
• Copy of delivery note (in case of sale of old car)
• Copy of the booking receipt (in case of buying a new car)
• NCB certificate

How does NCB work?

NCB helps in reducing annual car insurance premium. Every year, NCB increases by 5% for each claim-free year, which can be utilised for subsequent year’s premium. Let’s understand this with an illustration-

Illustration

On first renewal, a car with IDV (Insured Declared Value) of Rs. 4 lakh has own damage premium of Rs. 12,000. The policyholder is entitled to 20% discount if he has not made a claim. Therefore, his premium would be Rs. 9,600, instead of Rs. 12000. He clearly saves Rs. 2,400 by not making a claim.

The money saved on OD (Own Damage) premium keeps increasing every year with the discount increasing annually.

Let’s check how no claim bonus increases every year as per the rule set by IRDA:

*OD=Own Damage

When is NCB Terminated?

NCB will be terminated when either of these situations occurs:

• If a claim is made during a policy year, no NCB will be given in the next year.
• If the policy is not renewed within 90 days from the date of expiry of the existing policy.

More about NCB:

• NCB can be transferred from one vehicle to another as long as the policyholder is the same.
• NCB is transferable from one insurer to another at the time of renewal.
• An NCB Certificate from the existing insurer will be required in order to transfer the NCB

NCB for Commercial Vehicles

Business plans and fleet vehicles don't generally give you a chance to develop NCB, but some insurers may consider your experience of driving a commercial car while figuring your premium.

If you have insured your car for "social, residential and delight" purposes, and in addition to work, you presumably can build NCB.

NCB is Not Applicable to Third Party Insurance

No Claim Bonus is a benefit that is only offered with the Own Damage cover. It means, you can’t avail the NCB discount against your car insurance, if you own a third party cover only. Similarly, it is not applicable to the add-ons as well. So, at the time of renewing your policy, if you drop an unnecessary add-on cover, it won’t impact your accrued NCB. The only add-on that you can consider is NCB Protector, by opting for which you can protect your NCB benefit, in case of a claim.

Validity of Proof of NCB

The proof of NCB is generally valid for two years. Therefore, if a policyholder is off the road for any reason or don’t have his own policy for more than two years, he will have to start from scratch the next time he takes out an insurance cover.

NCB if the Vehicle is in an Accident or Stolen

In case of an accident, unless the insurer recovers the majority of its expenses from the other party, for example, the driver who might be at fault, then a bit of or the entire no claims bonus will be lost. If the event involves a third party and the fault of the driver cannot be determined, then the expenses will be divided into two, and the no claims bonus will be affected.

The same applies if the vehicle is stolen, as the insurer will be not able to recover its expenses from the other company, and the no claims bonus will be at risk.

Can NCB be Protected?

By paying an extra premium, the insured can protect the accrued No Claim Bonus, even if a claim is made. With No Claim Bonus Protector, one can remain free-minded from losing the NCB benefit. Probably, this expense will not be exactly the discount accessible after five years of no claims, despite the fact that there may be breaking points regarding how frequently the insurance can be utilized and two claims or more each year may still have an impact. Paying for No Claim Bonus Protection does not keep the cost of the policy from increasing later on.

Mirrored No Claims Bonus

The term no-claim bonus is used when an individual who has already gained a bonus on an existing car insurance policy, now decides to purchase a vehicle for commercial purposes.

NCB in case of a Named Driver

A couple of car insurance providing companies allow named drivers to acquire a no claim discount as well. This is splendid that if in the long run, the named driver wants to go onto their own insurance policy approach later, in light of the fact that as a rule, a standard car insurance policy doesn't permit named drivers to win their own no claims history.

NCB Add-on

Since no claims bonus is offered as a reward to a policyholder who doesn't have any motor insurance claim in the earlier years, even a little claim can wipe out the full reward conveying it down to zero. Car insurance providers, however, offer their customers the alternatives of picking a no claim bonus maintenance protection add-on cover, also known as NCB maintenance add-on. Such extra covers offer an assurance on NCB up to a specific limit permitting NCB guarantee regardless of the possibility that cases have been made until a particular predetermined limit in the earlier year.

NCB Transfer

Since No Claim Bonus is offered to a policyholder and not to a vehicle, it can be moved for the sake of the present vehicle proprietor whom he or she can utilize while buying protection against any new vehicle.

NCB if Insurance is Shifted to a Different Insurer

In case the insurer changes the insurance provider, the new insurance company allows the exchange of no claim bonus in most cases. In the event of any questions over the qualification of the No Claim Bonus certificate, the new insurer may look for a revelation that the no claim reward is honest to goodness and no claim was registered with the previous insurer by the policyholder.

Dusky Clause

Among the alluring benefits of car insurance, No Claim Bonus is one such feature that aids in premium reduction. The NCB benefit can be utilised at the time of policy renewal to reduce the next year premium. But the fact is, you can claim up to a maximum of 50% NCB only. Once you have attained the slab, no more discount will be guaranteed, whether there is a claim or not. However, some insurers may offer a benefit beyond that, where the policyholder can carry forward the No Claim Bonus, until a claim is made. Once a claim is made, NCB turns to zero and the existing NCB grid is applied at the time of policy renewal.

Thus, NCB works for your car insurance and aids in reducing the car insurance premium. However, be careful at the time of choosing a plan and consider the one that comes with maximum of NCB. !