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.
For more information regarding the NCB discount slab, visit www.acko.com.
How Does the No-Claim Bonus Calculator Work?
Let's understand the NCB calculator with an example:
Samir buys a car insurance policy for the first time, paying a premium of ₹22,000. After the first claim-free year, he renews his policy. The original premium for the second year is ₹20,000 based on his car's depreciated IDV. As it is his first claim-free renewal, Samir gets a 20% Claim Bonus on his 2nd year OD premium.
No Claim Bonus is calculated only on the OD premium, not the total car insurance premium. If Samir's OD component for 2nd year is ₹16,000, with 20% NCB, his discounted 2nd year OD premium comes to ₹12,800 (16,000 - 20%)
Therefore, while the total premium may be ₹20,000 for his 2nd policy year, Samir gets a reduced payout of ₹12,800 towards his Damage cover thanks to his No Claim Bonus.
Major Benefits of NCB
Some of the most significant benefits of maintaining a high No Claim Bonus are:
- Substantial savings: It can reduce your car insurance premium by up to 50% over five claim-free years
- Reward for safe driving: Your bonus keeps increasing as long as you drive safely without claims
- Transferable: You can carry forward your NCB if you sell your car and buy a new one
- Incentivises careful driving: It motivates you to avoid rash driving and maintain your car well
Things to Know About Transferring No Claim Bonus
What if you sell your car and purchase a new one? Can your NCB be transferred seamlessly to ensure the new car's insurance? Let's find out.
- NCB is linked to the policyholder, so it can be transferred when you buy a new car
- When you sell your car, inform your insurance provider to preserve your NCB
- Buy insurance for the new car from the same insurer within 90 days to quickly transfer your NCB
- Submit relevant documents like insurance policy copies, invoices, etc., to the insurer
- Short delays beyond 90 days may be condoned, but longer lapses may lose you the NCB
- Check with your insurer on specific rules about documents and time limits for transfer
Following the proper process, you can carry your hard-earned NCB with you for unlimited years and cars!
Conclusion
This detailed guide clarifies what a No Claim Bonus is, why it matters and how you can maximise its benefits for your car insurance. Maintaining a clean track record on the road pays in more ways than one! So buckle up, drive safe, and let those NCB savings keep increasing. Most importantly, ensure you renew the policy in time to retain your hard-earned No Claim Bonus year after year.
