No Claim Bonus (NCB) in Car Insurance

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No Claim Bonus (NCB) is a reward given by an insurer to a policyholder for not making claims during the policy term. NCB can be accumulated as a discount that ranges from 20% to 50% on the car insurance renewal premium. No Claim Bonus (NCB) can be transferred even if the policyholder changes the vehicle or the insurance provider.

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      What is No Claim Bonus in Car Insurance?

      An NCB or No Claim Bonus refers to the discount or reward given by the insurer for not making a claim during the policy year. This reward can be used to get a discount on the next year's car insurance renewal premium.

      A No Claim Bonus, if accumulated for five consecutive years, can reach up to a 50% discount on renewal premiums if no claim was made in those 5 years. So, if you drive responsibly and don’t raise a claim, you can get up to 20- 50% savings on your policy renewal premium.

      What are the Benefits of NCB in Car Insurance

      The NCB reward offers several benefits to the policyholders. These benefits are:

      • Lower Premiums - The No Claim Bonus helps you earn at least 20% and a 50% discount on his/her car insurance premium. This discount can be used to reduce the premium amount you are supposed to pay when renewing your vehicle insurance policy.
      • Earn Rewards - No Claim Bonus is considered proof of being a responsible driver and maintaining the good condition of the insured car. Thus, you can earn rewards in the form of NCB by not making any claims during the previous policy tenure.
      • Granted to Policyholders - A takeaway from NCB is that it is granted to the policyholder, not the car. Therefore, whether you buy a new car or sell your insured car, the NCB will remain with you as long as you renew your car insurance policies. It can be transferred to the new car but not the new car owner.
      • Transferable to Another Car/ Insurer - The No Claim Bonus can be easily transferred to another car if you change your 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.
      • Higher Savings: The NCB percentage will increase by following all the rules. Those who don't raise any claims for five consecutive years can get a sizable discount on their premiums each time their policy is renewed.

      How Does No Claim Bonus Work?

      NCB helps in reducing annual car insurance premiums. Every year, NCB increases by 5% for not raising a claim in that policy year, which can be utilised for subsequent year’s premiums.

      Let’s understand how No Claim Bonus is calculated with an illustration-

      Illustration

      On the 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 a 20% discount if he has not made a claim. Therefore, his premium would be Rs. 9,600 instead of Rs. 12,000. He clearly saved Rs. 2,400 by not making a claim during his policy tenure.

      The money saved on the OD (Own Damage) premium keeps increasing yearly, with the discount increasing annually till there are zero claims.

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

      Number of Claim-free Years NCB Percentage
      At the time of 1st claim-free renewal 20%
      At the time of 2nd claim-free renewal 25%
      At the time of 3rd claim-free renewal 35%
      At the time of 4th claim-free renewal 45%
      At the time of 5th claim-free renewal 50%

      *OD=Own Damage

      How to Transfer NCB to New Car Insurance?

      An NCB can easily be transferred in two scenarios:

      • If you are planning to buy a new car, you can transfer NCB to your new vehicle
      • If you are looking to switch your insurance provider at the time of car insurance renewal

      Thus, an NCB will remain with you until you renew your car insurance within the expiry date. If you sell them your car, it cannot be transferred to the new car owner.

      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.

      If buying new car insurance online, all you need to do is inform the new insurance company about the correct NCB, the name of your previous motor insurance provider and your old policy number to get your NCB transferred. The insurance company will automatically transfer the NCB from the old insurer to the current car insurance policy.

      If you want to buy new car insurance offline or through an agent, follow the steps given below to transfer your 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 No Claim Bonus to your new insurer.

      Documents Required for Transferring NCB

      The following documents are required to transfer NCB offline:

      • 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

      Is NCB Applicable to Third-Party Insurance?

      No, a No Claim Bonus reward is not applicable to the third-party car insurance policy.

      Third party insurance is a mandatory policy that only covers damages caused to the third party due to the insured car, such as third-party death, disability or property damages. The IRDAI sets the premium of the TP insurance policy.

      On the other hand, the NCB reward is only given on own damage premium and not third-party premium. So you will only earn NCB if you have an own damage or comprehensive car insurance policy (only on OD premium).

      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.

      Can NCB be Protected even After a Claim?

      A No Claim Bonus reward is only applicable till you do not raise a claim in the policy year. As soon as you make a claim, any NCB earned will become null and reset to zero.

      To overcome this, insurers offer an NCB Protect add-on that can be used to retain your earned NCB reward even if you raise a claim during the policy year.

      This add-on comes at an extra premium and can be purchased along with a comprehensive car insurance policy. Thus, this

      Wrapping Up!

      NCB is a very beneficial feature offered by almost every insurance provider in India. This feature can help you save huge on your renewal premiums. However, to get the benefit of NCB, make sure to drive responsibly on the road and not raise a claim during your policy tenure.

      FAQs on No Claim Bonus

      • Q1. When is NCB Terminated?

        Ans: 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
      • Q2. How can I get my NCB certificate?

        Ans: To get an NCB certificate, you can contact the previous insurer and request them for an NCB certificate. The insurer will analyse your policy details and issue an NCB certificate.

      • Q3. When does the NCB get lapsed?

        Ans: The No Claim Bonus reward lapses if you renew your car insurance within the grace period of 90 days of policy expiration.

      • Q4. Is it a good idea to get an NCB Protection Cover?

        Ans: New drivers who want to save money while maintaining their car should buy this cover. It will let the insured file up to two claims in a year while keeping their NCB component, resulting in a cheaper car insurance premium on their next renewal.

      • Q5. Can one No Claim Bonus cover multiple cars?

        Ans: No. An NCB discount is applicable for only one car. If you own more than one car, you will need to get all of them insured under separate car insurance policies and build NCB for each.

      • Q6. Is NCB available even if I change the type of car?

        Ans: Yes. Motor insurance companies allow you to maintain your No Claim Bonus discount even if you change the type of car. For example, you have been maintaining NCB on your old SUV and now decide to buy a sedan. In this case, the NCB from your old SUV can be transferred to your new sedan despite a change in the kind of car.

      • Q7. What is the maximum percentage of NCB available under car insurance?

        Ans: A maximum of 50% of the No Claim Bonus can be availed under a car insurance policy in case of not administering any claims for the previous five consecutive years.

      • Q8. Will I lose my NCB if I stop driving?

        Ans: No. Your No Claim Bonus will remain intact even if you stop driving the insured car. The only way to lose your NCB is by raising a claim or not renewing the policy.

      • Q9. Do car insurance companies verify the claim history and check the NCB?

        Ans: Yes. Motor Insurance companies cross-check the claim history and check the validity of the NCB at the time of policy renewal. Moreover, they will also verify if the NCB percentage declared by the car owner is correct.

      • Q10. Do I lose my NCB if I cancel insurance?

        Ans: Yes. You will lose out on your NCB if you cancel your car insurance policy before the policy expiry date. But if you want to change your insurance company, you should get the NCB Certificate issued or declare your correct NCB to the new insurance company in order to not lose out on the bonus..

      • Q11. How will a claim impact my NCB?

        Ans: If you make a claim under your car insurance policy, you will lose your NCB irrespective of how big or small the claim amount is.

      • Q12. How much NCB will I lose after a claim?

        Ans: In the event of raising a claim under your car insurance policy, you lose some or all of your NCB if your insurer has to pay out. The loss per cent depends on how many years NCB you have, as well as on the insurance company.

      • Q13. What if NCB is zero?

        Ans: In case your NCB becomes zero, you will not be able to get any discount at the time of renewing your car insurance policy.

      • Q14. What are IDV and NCB in car insurance?

        Ans: IDV and NCB are the two most common terms in car insurance methodology. IDV refers to the Insured Declared Value of the car which is compensated to the policyholder in case the car suffers a total loss. On the other hand, NCB is the reward that is granted to a policyholder whenever he/she does not make a claim in the policy year. This reward can be used to get a discount on the policy premium at the time of car insurance renewal.

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