A sound car insurance plan safeguards your vehicle from unforeseen risks such as accidents, theft, or loss incurred due to natural and man-made disasters. But the policies also offer rewarding incentives under the No Claim Bonus (NCB). In this article, we will be discussing the NCB in car insurance in detail.
What is NCB in Car Insurance?
The NCB is a discount provided on comprehensive car insurance plans for not making any claims during the policy term. Thus, for each claim-free year, you will earn NCB starting from 20% and can go up to 50% over the five years. With NCB benefits, you can avail discounts on the premiums charged at the time of policy renewal.
Perks of NCB
Apart from offering discounts on the premium during car insurance renewal, there are a host of perks that come along with NCB. They are mentioned as follows –
- NCB is like a reward you recieve for maintaining your car successfully throughout the year without causing any damage to it
- In case you are buying a new car or changing your insurance provider, NCB can be easily transferred
- Upgrading to a new car and transferring the NCB will help you avail discounts on the premiums charged on the new car
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 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.
How is NCB Calculated?
As explained earlier, the no claim bonus can be avail on comprehensive car insurance plans at the time of policy renewals. To enjoy the benefits under NCB, you should not make a single claim during the policy term. A maximum discount of 50% can be availed on premiums for cars that are over 5 years old.
But note that you will lose all the NCB benefits earned over the years if you claim on your car insurance. Consider this example for a better understanding.
Ms Riya and Ms Nikita buy comprehensive car insurance for the same car model from the same insurer. In the first year of the policy, Ms Riya makes a claim while Ms Nikita does not. That way, Ms Nikita is granted 20% NCB.
So, let us assume that the premiums paid for the first year by both the parties are INR 15,000. At the time of renewal, the premium charges are INR 12,000 to both the parties. However, since Ms Nikita can avail a 20% discount on the NCB earned for a claim-free year, she will have to pay INR 9600 as a premium for car insurance; while Ms Riya will proceed to pay a premium of INR 12,000.
When is NCB Terminated?
The insurer terminates the no claim bonus in case of the following situations –
- If a claim is made on your car insurance during the policy term, the NCB is nullified
- If the policy is not renewed within 90 days after its expiration
Impact of NCB Discount on your Premium Calculation
Here’s a detailed breakdown of the NCB discounts applicable for each claim-free 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%
When you upgrade to a new car or plan to switch from your existing insurer, you can still avail the benefits of NCB only if you have made no claims during the previous policy term.
As we mentioned earlier, NCB is transferable from one car to another only if the new car is bought under your name. On the other hand, you can transfer NCB from your existing insurer to another one at the time of renewing your car insurance policy.
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
FAQs about NCB in Car Insurance
Q: I am planning to buy a new car. Will it affect my NCB?
A: No. NCB is transferable from your old car to the new as long as the new car is purchased under your name. In case you happen to cancel your existing car insurance plan, you will have two years to reuse the earned NCB.
Q: Will I be able to use my NCB in two different cars at the same time?
A: No, you have to buy individual policies for each car which will have separate NCB.
Q: Is there a way I can retain my NCB even after making a claim?
A: Yes. Insurers provide an add-on cover known as No Claim Bonus Protection that can be purchased over your existing comprehensive car insurance plan. With this add-on, you can make at least one claim on your policy without losing the NCB benefits.
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