Besides protecting your vehicle from unforeseen risks, car insurance policies in India offer a rewarding incentive, known as the No Claim Bonus (NCB). A No Claim Bonus is a discount/bonus offered by the insurer at the time of policy renewal, provided that the insured has not made any claims in the preceding policy year. It can be likened to a reward or an incentive offered by insurance providers to policyholders who drive safely and responsibly. Hence, as a car insurance policyholder, you can enjoy a No Claim Bonus for every claim-free policy year.
How does NCB work?
A No Claim Bonus is calculated as a percentage of your car insurance premium and can range anywhere between 20 to 50%. The percentage of bonus offered depends upon the consecutive number of claim-free policy years. If you do not make a claim in the first year, you will be eligible for a discount of 20% on the first policy renewal and 25% discount after two consecutive claim-free years and so on. The NCB discount can go up to 50% after five consecutive claim free years. Here’s a detailed breakdown of the NCB applicable for each year:
After the first claim-free year – 20%
After the second consecutive claim-free year – 25%
After the third consecutive claim-free year – 35%
After the fourth consecutive claim-free year – 45%
After the fifth consecutive claim-free year – 50%
Here’s an example that will help you understand the benefit of NCB v/s Claim.
Mr Pankaj has a car with an Insured Declared Value (IDV) of Rs. 4 lakhs and an own damage premium of Rs. 12,000. If he does not make a claim in the first year, he will be entitled to a 20% discount, which is Rs. 2400. Unfortunately, his car suffers damage of Rs 1200 due to a small accident. However, he chooses to bear the expense from his own pocket and avail the NCB benefit later. Hence his premium at the time of car insurance policy renewal will be Rs. 9,600 as he will save Rs. 2,400 as NCB.
Mr Mohammad has a car with an IDV (Insured Declared Value) of Rs. 4 lakhs and an own damage premium of Rs. 12,000. His car suffers damage of Rs 1200 due to a small accident. He applies for a claim and is compensated for the damages. However, he will have to forgo his No Claim Bonus of Rs 2,400 and pay a premium of 12,000 at the time of renewal. As a result, Mr Mohammad ends up losing an additional Rs 1200 by claiming his damages and giving up the NCB benefit.
As you can see, both Mr Pankaj and Mr Mohammad have to pay the same premium, however, Mr Pankaj utilises the NCB benefit wisely to enjoy more savings.
Important things to know about No Claim Bonus:
- NCB can be switched from one car to another as the policyholder is the same.
- NCB is not applicable on third-party.
- NCB can be protected with car-insurance add-ons.
- If the policy is not renewed within 90 days from the date of expiry of your existing policy, the insurer has the right to revoke your NCB.
- No claim bonus is given if you switch from an insurance company to another.
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