Owning a car comes with many responsibilities, including purchasing car insurance. While it may seem like just another expense, having adequate coverage protects you financially in case of accidents, damage, or theft. One way Indian car insurance companies reward safe driving is through something called a No-Claim Bonus (NCB). But what exactly is an NCB, and how does it benefit you? Let’s explore the world of No-Claim Bonuses.
What is a No-Claim Bonus?
A No-Claim Bonus is a discount on your car insurance premium if you do not make any claims during the policy period. So, if you can drive safely without any accidents or damage to your car, your insurer will reward you when you renew your policy. The discount can be as high as 50% if you have five consecutive claim-free years.
Essentially, an NCB incentivises safe driving habits. If you can go accident-free for a year, you’ll pay less for insurance during the next renewal. This keeps adding up yearly until you reach the maximum 50% discount.
Why is No-Claim Bonus Important?
Motor insurance is mandatory in India, but comprehensive policies that provide extensive coverage can get expensive. An NCB discount helps lower premiums substantially over time. For instance, if your car insurance costs ₹15,000 per year, a 50% NCB would reduce it to just ₹7,500. That's a significant saving!
Moreover, due to high premiums, buying comprehensive coverage for older cars may cost little money. However, loyalty rewards like no-claim bonuses make sticking to one insurer more beneficial in the long run.
NCB also encourages policyholders to drive more carefully to avoid accidents and claims. This means insurers process fewer claims, lowering their risk exposure. For policyholders, NCB is an incentive and reward for safe driving practices.
How Does No-Claim Bonus Work?
The NCB discount applies only to your car insurance's Own Damage (OD) component, which covers damage to your insured vehicle. It does not apply to the mandatory Third Party (TP) premium, which covers injury or damage that the insured vehicle causes to a third party.
The NCB discount slab depends on consecutive claim-free years as follows:
Claim-Free Year | Discount (%) |
1st | 20% |
2nd | 25% |
3rd | 35% |
4th | 45% |
5th onwards | 50% |
So if you buy car insurance for the first time and renew it without any claims after Year 1, you get a 20% NCB on OD premium for Year 2. It keeps increasing by 5% every claim-free year until Year 5, when it maxes out at 50%. If you claim during any policy year, your NCB discount will be reduced to zero. If you have a claim-free renewal, you must start again at 20% from the following year.
Please note that different insurers may have minor variations in their NCB policies. So, check with your provider regarding the exact conditions.