As a car owner, you might have come across the term No Claim Bonus on several occasions while buying, reviewing, or renewing your car insurance policy. While traditionally, most people believed that car insurance is only for a bad driver, the exponential increase in the number of accidents in India over the last two decades has led people to think otherwise. Also, with comprehensive car insurance policies that offer protection against damages and losses due to accidents, mishaps, theft, natural disasters, and man-made disasters, car insurance has become an essential tool for financial protection against potential losses.
With time, insurance companies have evolved their offerings and have included several bonuses and discounts to make the plans more attractive to car owners. Today, we will be discussing one such feature – No Claim Bonus in car insurance.
What is No Claim Bonus in car insurance?
While you pay a premium for the coverage offered by the car insurance policy, there can be years when your car doesn’t meet with a major accident that demands repairs. Hence, the premium paid by you generates no tangible returns. While this is a good thing since it means that your car has been safe, it also means that the insurance company had no claims to pay and hence generated maximum profit from your policy.
Over the years, as the insurance market got competitive, companies tried making their services cost-efficient for policyholders. This led to the launch of a No Claim Bonus or NCB.
Under NCB, the insurance company started rewarding policyholders for not making a claim in a policy term. Usually, a car insurance policy has a validity of one year post which you need to renew it. If you don’t raise any claim during that term, then the insurance company offers you a discount on the premium for the subsequent policy term on renewal. In other words, the insurer rewards you for driving carefully and not making any claims. This works in your benefit since it keeps you safe and allows you to avail of the same features at a lower premium rate.
Further, NCB is a progressive bonus. This means that if you don’t file a claim for the second year in succession, then the discount on premium increases. In fact, you can claim up to a 50% discount if you don’t file a claim for a few years in succession. While you must check with your insurance provider, a typical NCB grid is as follows:
| NCB Slab | |
| Number of years without filing a claim | Discount Rate |
| 1 | 20% |
| 2 | 25% |
| 3 | 35% |
| 4 | 45% |
| 5 | 50% |
Is NCB available on both third-party liability and comprehensive policies?
No. The NCB discount offered by an insurance company is applicable only to the own-damage component of the premium. Usually, if you buy a comprehensive policy, the own-damage component is around 80-50%, and the third-party liability component is around 15-20%. Hence, if your car insurance premium is Rs 10000, then the own-damage premium would amount to Rs 8000-8500, and the third-party liability premium would amount to Rs 1500-2000. The NCB discount will be available on own-damage premium alone. So, a 20% NCB will translate to a discount of Rs 1600-1700.
Hence, if you have purchased a third-party liability cover, then the NCB discount is not available.
Can you transfer the No Claim Bonus?
It is important to remember that NCB is not about your car – it is about you. Even if your car has a collision and needs minor repairs, you can choose not to raise a claim. Hence, the insurance company associates NCB with the vehicle owner. This allows you to transfer the NCB benefit to a new car. However, you cannot transfer it to another person except to your legal heir upon your demise. The process of transferring NCB will be different while buying car insurance online and offline. Hence, talk to your insurer about the same.
Remember, the NCB discount is available only while renewing your car insurance policy. If you are opting for an online car insurance renewal and have not raised a claim in the previous year, then ensure that the insurer has deducted the NCB discount.
Summing Up
As a car owner, buying insurance is mandatory in India. While the law mandates a third-party liability cover only, most people opt for comprehensive policies that cover the mandatory third-party liability and own-damage. This ensures that they have a wide safety net to protect them from any financial losses due to damage or loss to their car due to external reasons. While you take maximum care to ensure that your car is safe, four-wheeler’s insurance protects you at all times. The NCB discount works wonderfully for people who are careful about how they drive and park their vehicles. Look at it as a reward for being careful on the roads. It benefits you, the insurer, and other vehicles on the road. Make the most out of this feature. Good Luck!
