No Claim Bonus in Motor Insurance Policy

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A No Claim Bonus (NCB) is a pat on the back given by an insurance company to the policyholder for safe driving - offered by the way of a discount on a car or two-wheeler insurance policy’s premium. Premiums tend to escalate because of ever-rising inflation, and inflation is also the reason why even a small discount on premiums is a welcome relief for policyholders. No Claim Bonus is, therefore, an important part of a motor insurance policy.

However, there are several misconceptions revolving around NCB and its eligibility, particularly when it comes to selling a vehicle or purchasing a new one.

Here are the resolutions to some of the most common concerns about the no claim bonus in a motor insurance policy:

Meaning

NCB is a benefit provided to all car insurance policyholders as a reward for driving safely. It makes the policyholder qualify for a discount on his/her car or two-wheeler insurance policy’s premium if no claim(s) are filed in the previous policy year. 
NCB is awarded for the subsequent years during policy renewal and it can be accumulated over a period of time.

Read More About: No Claim Bonus (NCB)

Discount

NCB applies on the Own Damage premium of a motor insurance policy. If the owner of the vehicle takes only third party insurance, he/she would not be eligible for a No Claim Bonus.

All insurance service providers offer the same NCB. For cars and two wheelers, NCB starts at 20% discount in the second year or on the first renewal of the car or two wheeler insurance. This discount can reach a maximum of 50% in six consecutive years of policy renewal.

NCB on Own Damage Premium for Six Consecutive Claim-Fee Years

Number of claim free years

Discount percentage on Own Damage Premium

No claim made/pending during the full preceding insurance policy year

20%

No claim made/pending during two consecutive preceding policy years

25%

No claim made/pending during three consecutive preceding policy years

35%

No claim made/pending during four consecutive preceding policy years

45%

No claim made/pending during five consecutive preceding policy years

50%


No Claim Bonus Add-on

NCB is a reward given to policyholders for not making any claim in the previous years. However, even a small claim can cancel the entire bonus, making it zero.

However, motor insurance companies give their customers the option to select an NCB retention insurance add-on cover, which protects the no claim bonus up to a specific limit. By taking this NCB add-on, the policyholder can make an NCB claim even if a claim(s) has been made in the previous year, up to a specified pre-determined limit.

Decline of No Claim Bonus

NCB may be denied if:

  1. The policyholder has filed a claim during the previous policy year(s).
  2. The policyholder has not renewed his/her car or two wheeler insurance policy within 90 days of the existing motor insurance policy’s expiry date.

Transfer of No Claim Bonus

The best thing about NCB is that it is tied to the policyholder and not to the car or two- wheeler. Therefore, it can be transferred in favour of the current vehicle owner, and he/she can use this bonus when buying an insurance policy for a new vehicle in the same category.

Steps to Transfer NCB:

  1. To be able to transfer NCB from one vehicle to another, if the owner sells the first vehicle, a photocopy of the ownership transfer certificate and the old registration certificate must be provided to the new insurer.
  2. The NCB certificate should be taken from the insurance company after sending them the delivery note copy.
  3. A written request must be given to the new insurance company or to the same insurance company for the new policy as the case may be, in order to transfer the NCB from the existing policy to a new one.
  4. The NCB certificate is valid for up to three years. It can be transferred to the new vehicle policy anytime within this stipulated time frame.

Status of No Claim Bonus in Case of Shift to a Different Insurance Company

If the policyholder switches to a different insurance service provider, the new insurance company usually permits the transfer of the No Claim Bonus. In case of doubts or queries regarding the validity/eligibility of the NCB certificate, the new insurance company could ask for a declaration from the previous insurance service provider that the NCB is indeed genuine and that the policyholder did not previously make any claim from them.

Making Small Claims - Does it Make Sense?

If the policyholder’s car or two-wheeler gets damaged, he/she must get an estimate for the repairs. If the NCB amount you stand to forfeit in the forthcoming year exceeds this estimate, it makes sense not to raise a claim and instead pay for the damage out of your pocket.
In any case, making claims lesser than INR 2,000 is usually not advisable.

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