What is No Claim Bonus in Car Insurance Policy?

No Claim Bonus (NCB) in Car Insurance: An Overview

You need to renew a motor insurance policy every year to ensure an ever-ready financial cushion in case any damage is caused to your vehicle. But what happens to a car insurance policy when you do not raise a claim against it? Does the policy you purchased for the year go to waste? No, not at all! 

Motor insurance companies offer a reward called no claim bonus in car insurance for a claim-free policy year. A no claim bonus may benefit you in multiple ways, from offering a discount on premiums to saving you money. 

Hence, it becomes crucial that you know every aspect of no claim bonus in car insurance. We at RenewBuy make it easy to explore the no claim bonus on vehicle insurance. Read on!

What is No Claim Bonus in Car Insurance?

NCB, or no claim bonus, is an incentive offered by vehicle insurance companies when you do not raise a claim in a policy year. The NCB provides a discount on your premium every time you renew your policy after expiry. 

The no claim bonus in car insurance is allotted according to the IRDAI guidelines. It ranges from 20% to 50% based on the years spent without a claim. Moreover, if you have already secured over 50% NCB in a previous car insurance policy during renewal, you will not earn a higher NCB for a claim-free year. 

Advantages of NCB in Car Insurance

Besides offering rewards at the time of policy renewal for not raising the claim, the NCB offers the following benefits: 

Lower Policy Premiums: You can accumulate the no claim bonus discount for up to 5 years. At the time of policy renewal, you may get a significant discount on the policy premium.  

Easy to Transfer: If you purchase a new insurance policy or purchase/ sell a car, the no claim bonus is not lost but transferred. 

Rewards for Responsible Driving: A no claim bonus in car insurance is your reward for responsible driving and good vehicle maintenance throughout the year. 

Benefit to Owner and Not on Policy: If you buy a new vehicle, the no claim bonus can be transferred to the insurance policy of your new vehicle. Or, if you sell your existing car, the car insurance policy remains active until you renew it for a new vehicle. 

High Savings: The no claim bonus percentage will increase for every claim-free year. Individuals who have not raised any claims for five years will receive a good discount and, hence, a great savings opportunity.

How Does No Claim Bonus in Car Insurance Work?

Let’s understand the workings of a no claim bonus with a simple example. 

Suppose you are a responsible car driver and have a car insurance policy. With safe driving, you have not filed any claim during the policy year. 

At the time of policy renewal, your insurer acknowledges the claim status of the past year and rewards you with a no claim bonus discount. The no claim bonus increases with every claim-free year. 

Say you get a 20-25% claim discount on the first claim-free year. For the next two to three years, you may get a 5% discount every year for every claim-free year. Ultimately, this will help you gain significant discounts on motor insurance renewal premiums—a win-win situation for you!

How to Calculate NCB in Car Insurance?

The first thing to note is that NCB in car insurance is not computed on the entire premium but is applicable to the policy's own damage component. The NCB reward starts at the time of policy renewal from the first claim-free year and increases by 5-10% for each claim-free year. Once you make a claim, the NCB becomes null and resets to zero. 

Let’s understand the calculation of NCB in car insurance with the table below: 

Example to Understand NCB in Car Insurance

Say, during the policy renewal, a car insurance policy has an insured declared value of Rs. 5 lakhs and an own damage premium of Rs. 15,000. The policyholder did not make a claim and got an NCB of 20% for the first year. Upon using the reward, the updated premium will be: 

The premium increases for every claim-free year until it reaches 50%. You can use an NCB calculator to determine the NCB value of your car insurance policy.

How to Transfer NCB to a New Car or Insurer?

The transfer is one of the prime features of the no claim bonus. You can transfer your NCB to a new car or new insurer. However, you cannot transfer the NCB to a new owner. There are two conditions when you need to transfer NCB: 

1. When planning to buy a new car
2. When planning to switch car insurance provider at the time of renewal

Steps to Transfer NCB 

Follow the given steps to transfer the no claim bonus: 

• When purchasing new car insurance, inform your old car insurance provider about it. 
• Request your old car insurer to transfer no claim bonus and provide all the necessary documents. 
• Once the documents are verified, the old insurer will issue the NCB protection certificate. 
• Submit the NCB certificate to the new motor insurance company, and they will automatically transfer the NCB from the previous insurer to the new one. 

Note: If you do not share the NCB certificate, declare the new motor insurance company about the NCB rate and that you have not made any claim under the expiring policy. If the claim is found to be false, you lose the benefits. 

Document Required to Transfer NCB

The following documents are required to transfer NCB to the new insurer/ car offline: 

• Transfer application
• Old car insurance policy copy
• Buyer and seller agreement (Form 29 & 30)
• Old registration certificate transfer 
• Copy of delivery note (for old car sale)
• Copy of booking receipt (while buying a new car)
• Copy of transferring the old RC (in case you are selling the old car)
• NCB certificate

Facts to Know About NCB in Car Insurance

Let’s talk about some important facts about no claim bonus in car insurance that will help you gain a better understanding: 

• Applicability of No Claim Bonus in Car Insurance: The no claim bonus is calculated at the time of policy renewal and on the own damage cover component of the insurance policy. NCB is rewarded for its comprehensive car insurance policy, not for the third-party liability policy. 
• Protection of NCB: You can add an NCB protection cover add-on to a comprehensive car insurance policy. This protects the no claim bonus in car insurance even if you have made a claim during the policy period. However, the number of claims allowed is limited.
• Termination of NCB in Car Insurance: The no claim bonus in car insurance is terminated or cancelled if you raise a claim during a policy year. Your NCB becomes zero, and no NCB is given in the next year. Your NCB also terminates if you fail to renew your car insurance policy within 90 days from the expiry of the policy, leading to lapse. Also, if you have purchased a new insurance policy but failed to transfer the NCB to the new policy, it can be terminated. 
• Retain NCB After Claim: To retain the NCB in car insurance, you must buy no claim bonus protection add-on cover with the comprehensive car insurance policy. 
• NCB in Case of Car Theft/ Stolen: In case of car theft, claiming insurance will result in the loss of your accumulated no claim bonus. The NCB can be transferred to a new car insurance policy if purchased within a specified period, usually 90 days. 
• NCB in Case of Car Accident: If you face a car accident and make an insurance claim, you will lose the no claim bonus you have accumulated. The NCB, which rewards claim-free years, resets to zero after a claim. 

How Can I Utilise the NCB in Existing Car Insurance Policy?

If you have an NCB benefit on your existing car insurance policy and you decide to buy an old car or purchase a new car in the middle of the year, keep in mind the below points:

• If you buy an old car from a dealer or third party and are eligible for NCB, you can apply for a claim bonus transfer. All you need to do is inform your existing motor insurer and request them to NCB transfer certificate. 
• If you purchase a new car insurance policy from any insurer or RenewBuy, you must mention the details of your previous insurer and outstanding NCB details. We will take care of the rest.  

What Affects the NCB in Car Insurance?

Here are some important aspects that affect the NCB in car insurance:

NCB Reduces After Certain Years: The maximum NCB you can earn is 50% even if you have not claimed after five consecutive claim-free years. 

NCB is not Calculated on the Entire Premium: The NCB is calculated on own damage cover premium and not on the entire policy premium amount. It does not apply to the premium for third-party insurance. 

Incorrect NCB Declaration: If you have provided incorrect NCB information to the insurer, your claim can be rejected. 

How to Check NCB in Car Insurance?

At the time of purchase of the new car insurance policy, you can refer to the NCB slab provided by the insurer. The NCB calculation is reflected in the policy document. If you prefer to renew your motor insurance policy online, the applicable NCB is available on the official website of the insurer. Simply log in to your account and check all the policy details with NCB credits. Also, you can connect with your insurance agent or RenewBuy Partner to know the NCB earned. 

Final Words

No claim bonus is a reward provided to the car insurance policyholder for being a responsible driver, maintaining the vehicle, and not filing a claim during the year. As a benefit of NCB, you can enjoy up to a 50% discount on premiums. 

There may arise a situation when filing a claim becomes necessary; hence, it is advisable to add NCB protection as an add-on cover to a motor insurance policy. 

FAQs on NCB in Car Insurance

Question: What are IDV and NCB in car insurance?

Answer: IDV is insured declared value, which is the maximum compensation amount you receive if your car is stolen or suffers a loss. NCB is no claim bonus, a discount on the premium when no claim is made during a policy year. You get the NCB benefit at the time of policy renewal.

Question: Do I lose my NCB if I don't claim?

Answer: If you have not made a claim in the policy year, the NCB is protected for the next renewal. 

Question: Do car insurance companies verify the claim history and check the NCB?

Answer: Yes, at the time of policy renewal, motor insurance companies check the claim history and the validity of the NCB. They also verify the NCB percentage as declared by the car owner. 

Question: Can I transfer the NCB to a legal heir?

Answer: In case of the car owner’s death, the policy with all the applicable benefits, including NCB, is transferred to the legal heir. 

Question: Can one NCB cover multiple cars?

Answer: No, your NCB discount does not cover multiple cars. You must buy individual car insurance for each car. 

Question: Is NCB applicable to third-party motor insurance?

Answer: No, you do not get the benefit of NCB on third-party insurance; the benefit is only available with comprehensive or standalone own-damage cover. 

Question: How can I check my no claim bonus in car insurance?

Answer: You can check your NCB in case insurance by reviewing your car insurance policy documents, logging into your insurer's online portal, or contacting your insurance provider directly.

Question: Does a car accident affect my no claim bonus?

Answer: Yes, claiming after a car accident will result in losing your accumulated NCB. Your NCB resets to zero for the next policy period.

Question: Can I transfer my no claim bonus to a new car?

Answer: Yes, if you switch vehicles, you can transfer your NCB to a new car's insurance policy. This transfer is typically done by providing the NCB certificate from your previous insurer.

Question: How much of a no claim bonus can I accumulate?

Answer: NCB typically starts at 20% for the first claim-free year and can increase to 50% over five consecutive claim-free years.

Question: Can I protect my no claim bonus in car insurance?

Answer: Yes, most insurers offer an NCB protection add-on that allows you to make a certain number of claims without losing your NCB. This add-on can help maintain your discount even after a claim.

* Disclaimer: The details, facts, or figures given here are intended solely for the reader's informational purposes and should not be relied upon for personal, medical, legal, or financial decisions. Please visit the insurer's website for the latest updates. We do not endorse any particular insurance company or insurance product provided by any insurer.