No Claim Bonus in Car Insurance

What is NCB in Car Insurance?

NCB is a reward system that offers a discount on your car insurance premium for every claim-free year. You can think of it as a loyalty bonus for driving responsibly. Starting with a 20% discount after the first claim-free year, the benefit can increase to as much as 50% over five consecutive claim-free years.

Here’s a quick breakdown of the NCB discount structure in India:

• 1 year: 20%
• 2 years: 25%
• 3 years: 35%
• 4 years: 45%
• 5 years: 50%

Note: NCB discount applies to the own damage (OD) premium component of your policy and not the third-party liability premium.

Why is NCB Important?

As stated above, no claim bonus isn’t just a financial incentive but a long-term strategy for saving money and encouraging safer driving habits. However, here’s why it matters:

• Cost Savings: NCB can reduce the own damage premium component of your insurance by up to 50%. For example, if your OD premium is ₹20,000, you could save ₹10,000 with a maximum NCB. Over five years, these savings add up significantly.
• Encourages Safe Driving: By avoiding accidents and claims, you are rewarded for responsible driving. This system creates a win-win situation for both insurers and policyholders.
• Transferable Benefit: Selling your car does not mean losing your no claim bonus. Since it is tied to the policyholder, you can transfer it to your new vehicle and continue reaping the rewards.
• Flexibility Across Different Insurers: If you switch insurers, your NCB remains intact as long as you provide a transfer certificate. This ensures continuity and prevents you from starting from scratch.

How Does NCB Work?

Here’s how NCB plays out:

• Claim-Free Year: If you don’t raise any claims during your policy term, you earn an NCB.
• Cumulative Benefit: For each consecutive claim-free year, the percentage of the NCB increases.
• Claim Impact: The moment you make a claim, your NCB resets to zero at the next policy renewal unless it’s a protected NCB.

For example, suppose your OD premium is ₹10,000. After three claim-free years, you would receive a 35% discount on your OD premium, saving ₹3,500.

Note: You can choose the No Claim Bonus (NCB) Protection add-on, which lets you file a claim without forfeiting your NCB. However, this comes at an extra cost. Moreover, it typically applies to minor claims like bumper or windshield damage.

How to Transfer NCB to a New Insurer?

NCB is tied to the policyholder and not the vehicle or insurer. When you decide to switch insurers, you can transfer your accumulated NCB to the new policy. Here’s how the process works:

• Obtain an NCB Certificate: When your policy is about to expire, make sure to request a No Claim Bonus (NCB) certificate from your current insurer.
• Submit to New Insurer: Provide this certificate to your new insurance provider when purchasing a policy.
• Verify Transfer: Ensure the new insurer applies the NCB to your policy premium as per the percentage you have earned.

For instance, in case you have earned a 35% NCB on your previous policy, this discount will apply to the OD premium in your new policy.

When Doesn’t NCB Apply?

While the NCB is a valuable benefit, it comes with certain limitations. Some include:

• Third-Party Liability Premium: NCB is only applicable to the OD component of your insurance premium. The third-party liability premium is fixed as per IRDAI guidelines and does not qualify for a no claim bonus.
• Claims During Policy Term: If you make even one claim during the policy term, your NCB resets to zero at the next renewal. This applies unless you have an NCB protection add-on.
• Policy Lapse: Failing to renew your car insurance policy within 90 days of its expiry results in the loss of your accumulated NCB.

If you renew your car insurance policy before it expires, your NCB remains intact. However, if you let the policy lapse and do not renew within the grace period, you will lose the benefit.

Wrap Up

Summing up, no claim bonus is one of the most effective tools for reducing car insurance costs while also promoting safer driving habits. Beyond the financial savings, it offers flexibility and rewards drivers for being cautious and responsible. It doesn’t matter if you are switching insurers, buying a new car, or simply renewing your policy; keeping your NCB intact can save you thousands over time.

For those looking to compare policies and find the best deals, Jio Insurance Broking offers a convenient way to compare various car insurance options. This helps you choose the right policy that maximises your no-claim bonus benefits and provides comprehensive coverage. After all, understanding and using your NCB in car insurance can significantly reduce your car insurance premiums and reward safe driving!