Understanding No Claim Bonus (NCB) in Car Insurance

Car insurance is a must-have for car owners in India, providing essential protection against accidents and damages. Among the many benefits it offers, the No Claim Bonus (NCB) stands out as a valuable reward for responsible driving. In this blog, we'll look into the meaning of NCB, its importance, eligibility criteria, and calculation methods, and debunk common misconceptions surrounding it. 

Additionally, we'll provide useful tips to help you maintain your NCB and enjoy reduced premiums. So, if you're curious about what the No Claim Bonus entails and how it can benefit you, read on!

What is No Claim Bonus (NCB)?

No Claim Bonus (NCB) is a discount given by insurance companies to policyholders in India who do not make any claims during the policy period. The NCB is usually 20% for the first year, 25% for the second year, and so on, up to a maximum of 50% for the sixth year. This means that if you have a claim-free record for six years, you can get a 50% discount on your car insurance premium.

NCB is a good way to save money on your car insurance premiums. It is also a good way to encourage safe driving habits. If you make a claim, your NCB will be reset to zero, so it is important to drive carefully to keep your NCB and save money on your premiums.

Importance of NCB in Car Insurance

The NCB plays a crucial role in reducing the financial burden of car insurance. By accumulating NCB, you can enjoy significant discounts on the premium when you renew your policy. When you accumulate NCB by not making any claims during the policy period, you become eligible for substantial discounts on your premium during policy renewal. 

This serves as an incentive for policyholders to drive responsibly and avoid making unnecessary claims, thereby promoting a safer driving culture on Indian roads. Emphasising NCB encourages drivers to exercise caution, ultimately leading to fewer accidents and damages, benefiting both individuals and the overall community.

Also Read : Car Insurance Policy – Everything You Ever Wanted to Know

How NCB Rewards Safe Driving

NCB encourages policyholders to drive responsibly and avoid accidents. When you don't claim the policy term, you prove yourself to be a safe driver, and in return, you are rewarded with a discounted premium when you renew your policy.

Here's how NCB rewards safe driving:

• NCB acts as an incentive for policyholders to practise safe driving habits and avoid accidents
• When you don't make any claims throughout the policy period, you demonstrate your responsible driving behaviour 
• By maintaining a claim-free record, you prove yourself to be a safe and cautious driver on the roads
• As a reward for your safe driving, you become eligible for a discounted premium during policy renewal
• With each claim-free year, you accumulate NCB, leading to higher discounts on subsequent renewals

The NCB Eligibility Criteria

In car insurance, the No Claim Bonus (NCB) is a significant benefit for Indian policyholders who drive safely and responsibly. To avail of this reward, you need to meet specific eligibility criteria. Let's explore these criteria and understand what it takes to qualify for NCB:

1. No Claims

• To be eligible for NCB, you must not have made any claims on your car insurance during the policy period
• This means driving cautiously and avoiding accidents or damages that require insurance claims

2. Active Policy

• Your car insurance policy must be active and not lapsed
• Ensure timely renewal without any breaks to continue benefiting from NCB discounts
• A lapsed policy can result in the loss of accumulated NCB

Also Read : How To Transfer Car Insurance From Your Name After Selling The Vehicle

Requirements for NCB Accumulation

NCB accumulation is the process of building up your NCB over time, which can lead to significant discounts on your car insurance premiums. Let's explore the requirements for accumulating NCB and how you can benefit from it: 

1. Claim-free years

• Each year without making any claims on your car insurance policy earns you a specific percentage of NCB
• This percentage accumulates over time with consecutive claim-free years

2. Renewal without a break

• To continue enjoying NCB benefits, it's crucial to renew your car insurance policy on time and without any lapses
• A policy renewal break can lead to the loss of your accumulated NCB

Factors Affecting NCB Eligibility

Now that you know about NCB and the process of accumulating your NCB, several factors can impact your eligibility. Let's explore them below:

1. Policy Type

• The type of car insurance policy you select, whether comprehensive or third-party, plays a significant role in determining your NCB eligibility
• Comprehensive policies usually offer higher NCB benefits compared to third-party policies

2. Policyholder Change

• When you sell your car and purchase a new one, the NCB earned on the old vehicle cannot be transferred to the new one
• The NCB is associated with the policyholder and not the vehicle

3. Claim History

• Your NCB percentage can be affected by your claim history
• Making claims during the policy term can lead to a reduction in the accumulated NCB percentage, making it vital to drive carefully and avoid unnecessary claims

Also Read : How to Choose the Right Car Insurance Policy?

How NCB Varies Across Insurance Providers

Different insurance companies have their own NCB structures and percentage calculations. While some may offer a higher NCB percentage for claim-free years, others may have a more gradual scale.

Here are some examples of how NCB varies across insurance providers in India:

HDFC Ergo

• HDFC Ergo offers a 20% NCB for the first claim-free year, and the NCB percentage increases by 5% for each subsequent claim-free year, up to a maximum of 50%

ICICI Lombard

• ICICI Lombard offers a 15% NCB for the first claim-free year, and the NCB percentage increases by 5% for each subsequent claim-free year, up to a maximum of 45%

Bajaj Allianz

• Bajaj Allianz offers a 20% NCB for the first claim-free year, and the NCB percentage increases by 2.5% for each subsequent claim-free year, up to a maximum of 50%

As you can see, the NCB percentages offered by different insurance companies can vary quite a bit. This is why it is important to compare NCB percentages before you buy car insurance.

Calculating NCB Percentage

According to a survey by the Insurance Regulatory and Development Authority of India (IRDAI), the average NCB in India is 25%. This means that Indian car owners are eligible for a significant discount on their car insurance premiums if they do not file any claims.

It is important to note that if you file a claim, you will lose your NCB. However, you will be able to start accumulating NCB again from the next policy year.

For example, if you have a 20% NCB and you file a claim, your NCB will be reset to 0%. However, if you do not file any claims in the next policy year, your NCB will be 20% again.

The NCB percentage is a significant factor in determining the cost of your car insurance premium. Therefore, it is important to drive safely and avoid claims to maximise your NCB and save money on your car insurance premiums.

Maximum NCB Limit and Slabs

According to a study by the Insurance Regulatory and Development Authority of India (IRDAI), the average NCB in India is 25%. The maximum NCB limit of 50% was introduced by IRDAI in 2017. In 2022, there were over 200 million active car insurance policies in India.

The NCB percentage increases with every claim-free year, and can be as follows:

• Year 1: 20%
• Year 2: 30%
• Year 3: 40%
• Year 4: 50%

Once you reach the maximum NCB limit of 50%, you will not be able to accumulate any further NCB, regardless of the number of claim-free years.

It is important to note that some insurers may have different slabs or limits for NCB. Therefore, it is always best to check the terms and conditions of your insurance policy before renewing it.

NCB Transfer and Retention

If you decide to switch your car insurance provider, you can transfer your NCB to the new policy. However, there are specific documents required for the transfer:

NCB Certificate

• Obtain an NCB certificate from your existing insurer, which states the percentage of NCB you have earned

Policy Cancellation Proof

• Provide the cancellation letter or document from your previous insurer

Here are the steps to transfer your NCB:

• Apply for an NCB certificate from your existing insurer
• Submit the NCB certificate and policy cancellation proof to your new insurer
• Your new insurer will verify your NCB record and apply the NCB to your new policy

Here are some important things to note about NCB transfer:

• You can only transfer your NCB once in a policy year
• The NCB transfer is valid for three years from the date of issuance of the NCB certificate
• If you file a claim during the policy period, your NCB will be reset to 0%

NCB Applicability for Multiple Vehicles

If you own multiple cars, you can transfer your NCB from one car to another. This means that if you have a 50% NCB on your first car, you can use that 50% NCB to get a discount on the premium for your second car.

However, you cannot use the same NCB for two policies simultaneously. This means that if you have a 50% NCB on your first car, and you file a claim on that car, you will lose your 50% NCB. You will then have to start accumulating NCB again from scratch on your second car.

Here are some key points to summarise the NCB applicability for multiple vehicles:

• You can transfer your NCB from one car to another
• You cannot use the same NCB for two policies simultaneously
• If you file a claim on a car with NCB, you will lose your NCB on that car
• You can start accumulating NCB again from scratch on another car

Common Misconceptions About NCB

Let's debunk some common myths about NCB.

Myth 1: NCB is the same for all policies

Fact: NCB percentages can vary between insurance providers. Always check with your insurer to understand their specific NCB structure.

Myth 2: NCB is transferable to other insurance types

Fact: NCB is only applicable to car insurance policies and cannot be transferred to other types of insurance like health insurance.

Myth 3: NCB is lost after a single claim

Fact: If you claim your car insurance, you will lose your No Claim Bonus (NCB). However, you can purchase the No Claim Bonus Protection add-on to protect your NCB. This add-on allows you to make up to two claims in a policy year without losing your NCB.

To purchase the No Claim Bonus Protection add-on, you will need to contact your insurance company. They will be able to tell you more about the add-on and how much it costs.

Tips to Maintain NCB

You can maintain your NCB and enjoy discounted premiums on your car insurance by following these tips:

• Drive safely and avoid accidents

• Consider small repairs without claiming insurance

• Regularly renew your car insurance policy without any breaks

• Be aware of your policy limits

• Check your NCB record regularly

The Bottom Line

No Claim Bonus (NCB) is a valuable reward that can save you a significant amount of money on your car insurance premiums. By driving safely and avoiding claims, you can build up your NCB and enjoy the benefits of being a cautious and claim-free driver.

If you do make a claim, you may be able to protect your NCB by purchasing the No Claim Bonus Protection add-on. By understanding the eligibility criteria, transfer process, and common misconceptions, you can make the most of your NCB and stay protected on the roads.

FAQs

Q. What is No Claim Bonus (NCB) in car insurance?

No Claim Bonus (NCB) in car insurance is a reward given to policyholders for not making any claims during the policy term, encouraging safe driving habits.

Q. How does NCB benefit policyholders?

NCB benefits policyholders by offering a discount on car insurance premiums at the time of renewal, making it a financial incentive for driving responsibly.

Q. How is NCB calculated for car insurance policies?

NCB calculation is based on the number of claim-free years, with the percentage increasing for each consecutive year without making a claim.

Q. Can NCB be transferred from one car to another?

Yes, NCB can be transferred from one car to another owned by the same policyholder, rewarding safe driving across different vehicles.

Q. Is it possible to retain NCB after making a claim?

Making a claim can lead to a reduction in the accumulated NCB percentage; however, it doesn't result in a complete loss of the NCB.

Q. How does NCB impact car insurance premiums?

NCB plays a significant role in reducing car insurance premiums, as the accumulated NCB percentage directly affects the renewal cost.

Q. Should I opt for the NCB protection add-on?

Yes, opting for an NCB protection add-on ensures that policyholders can retain their NCB percentage even after making a claim, safeguarding their NCB benefits.

Q. Can I avail NCB for multiple cars under my name?

Yes, NCB can be availed for multiple cars under your name, provided you have not made any claims for those vehicles during the policy term.

Q. What happens to NCB when transferring car insurance policies?

When transferring car insurance policies, you can transfer the accumulated NCB percentage from the previous policy to the new one, helping to continue enjoying the NCB benefits.