No Claim Bonus (NCB) for your Car Insurance

Vehicle insurance is mandatory. But make sure that you are not losing out on the No Claim Bonus especially when you are buying a vehicle (new or 2nd hand).

What is a No Claim Bonus (NCB)

No claim bonus is a discount given by the insurer to the policyholder on his / her vehicle insurance policy premium for making no claims. NCB can be accumulated over years and the discount ranges from 20% to 50% on own damage premium. No claims bonus (NCB) is crucial to reducing car insurance premiums.

What is Own Damage (OD) premium?

Before you understand NCB premium calculation, you must understand what is an Own Damage (OD) premium. Own Damage (OD) premium is the amount of premium that you pay to the insurance company over and above the mandatory third-party cover. If you have paid OD premium you are entitled to claim compensation in the case of damage to your vehicle due to flood, fire, earthquake, etc. In case you have only got 3rd party insurance (mandatory) done, then NCB will not be applicable on your premium since that is applicable only on the OD part of the premium of your total premium.

How does NCB work?

No claim bonus increases every year as per the following table. NCB rewards you for being a good driver and helps you save on your motor insurance.

The chart here illustrates the discount on Own Damage Premium on account of no claims for the consecutive years.

All Types of Vehicles	% of Discount on OD* premium
No claim made or pending during the preceding full year of insurance	20%
No claim made or pending during the preceding 2 consecutive years of insurance	25%
No claim made or pending during the preceding 3 consecutive years of insurance	35%
No claim made or pending during the preceding 4 consecutive years of insurance	45%
No claim made or pending during the preceding 5 consecutive years of insurance	50%

*OD= Own Damage

Illustration 

On first renewal, a car with IDV (Sum Assured) of Rs 4 lacs has own damage premium of Rs 12000. If no claim has been made, the policyholder is entitled to 20% discount so his premium would be Rs 9,600. He clearly saves Rs 2,400 by not making a claim.

The money saved on OD premium keeps on increasing every year with the discount increasing every year.

When is NCB terminated?

NCB can be terminated in the following 2 scenarios:

a) If a claim is made during the policy year, no NCB will be given in the corresponding next year. Reasons are obvious based on the NCB definition itself.
b) If the policy is not renewed within 90 days from date of expiry on your existing policy, then NCB is forfeited or terminated.

Important Notes :

a) NCB becomes Nil in case of a claim

b) NCB follows the fortune of the customer and not the vehicle. It stays with the initial owner of the car even when the ownership changes. In fact not many dealers update the buyers of this, and when someone with few years worth of NCB buys a new car, most of the people end up paying the full insurance amount, without claiming the NCB they have accumulated over the years.
c) NCB can be transferred to the new vehicle (actually the new owner) in case of substitution of vehicle of the same class
d) Validity of NCB is 90 days from the date of expiry of the policy
e) NCB can be utilized within 3 years (where the existing vehicle is sold and a new vehicle is purchased)
f) NCB recovery can be done in case of a name transfer.

g) NCB is also transferable from one insurer to another.

Save money wherever you can and you should. Money saved is money earned.

Cheers

Manoj Arora