What is No Claim Bonus (NCB) in Car Insurance and How is NCB Calculated?

NCB (No Claim Bonus) in insurance is a discount earned for each claim-free policy year. This reduces your premium, typically by 20% to 50%, rewarding safe driving. Read ahead to know why NCB is so important while renewing your car insurance policy. Note that NCB is associated with a Comprehensive vehicle plan and not with a standalone Third-party Liability plan.

Wondering what is NCB full form in insurance? Then, the answer is No Claim Bonus. Understand this with a situation wherein you have driven safely for a year and made no claims during the policy period. Your policy period is about to end, and it is time to do car insurance renew. Your insurer acknowledges the fact that you are a safe driver and wants to reward you for not raising a claim. Thus, the insurer offers you a discount while renewing your policy. This reward is termed as a bike and car insurance No Claim Bonus.

NCB works just like every other bonus is intended to work. First, it is a reward and second, a motivation to keep repeating the good performance. Thus, by providing the NCB in car insurance, insurers encourage you to drive safe and discourage you to raise claims. This way, a car insurance policyholder will think twice before raising claims for trivial issues.

NCB is important in car insurance because car owners spend a considerable amount on Comprehensive car insurance during the lifetime of the vehicle. The more the value of the car, the higher the premium. Since NCB helps to reduce the premium, it becomes an important feature for the car owner.

If you do not raise claims for five consecutive years, you gain a 50% discount on insurance premium. However, the percentage will reset to zero once you raise a claim. In simple words, as a policyholder, you get a discount on the payable premium for the subsequent year of the policy, considering you do not claim during that period. For instance, if you do not lodge a claim in the first year of your policy, you will get a 20% discount on the premium of second-year policy. It’s an assured way to save money on the car insurance policy premiums. You earn discounts for every claim-free year.

Below table will show you the NCB slab on the number of claim-free years:

Vehicles over and above 5 years of age will retain a 50% discount on the premium if the owner does not claim.

Here’s an example: Mr A and Mr B bought expensive vehicles of the same make and model. Both paid Rs. 22,000 to insure their vehicle for the first year. For the second year, the premium would reduce to Rs. 20,000 due to a reduction in the value of the vehicle.

Mr A did not raise a claim during the policy period (first year) but unfortunately, Mr B was involved in a car accident and had to raise a claim for damages. Therefore, Mr A received a 20% discount on the premium payable for the second year (first claim-free renewal) but Mr B did not receive the discount as his NCB was zero.

Note: The above example is just for explanatory purposes. NCB is calculated on the Own Damage component of the payable premium and not the overall premium.

Here’s an interesting option. If you opt for an NCB Protection Add-on, you can raise a claim and still qualify for the renewal discount. You will have to pay the No Claim Bonus Protection cover’s premium to avail its benefits.

No Claim Bonus is applicable at the time of policy renewal and only on the ‘Own Damage Cover’ component of your car insurance policy. Own Damage, as the name suggests, is the damage done to the insured car. Another component of car insurance is the Third-party Car Insurance cover, buying at least this component is mandatory as per Indian law. It is beneficial when a major accident is caused by the insured car in which third party property is damaged or a person is injured.

Financial protection against damage to the insured car is offered by a Comprehensive car insurance policy. Thus, NCB is applicable only on a Comprehensive policy and not on a Third-party Liability policy.

If you go for a Comprehensive Car Insurance policy, you can choose appropriate Add-ons for wider coverage. The NCB Protection Cover (Add-on) is designed to keep your NCB component – which is the protected No Claim Bonus – active even if you claim during the policy period. Note that the number of claims one can make are according to the terms and conditions.

The cost of NCB Protection cover will be in the range 5-10% of your policy premium.

The NCB protection cover can be beneficial for:

No Claim Bonus is a reward offered to the policyholder for not raising a claim. This bonus is given as per the guidelines of the Insurance Regulatory and Development Authority of India (IRDAI). Even if you decide to buy car insurance from another insurance company or buy another car (after selling the current one), you can claim the NCB accumulated in your name.

You will need a No Claim Bonus Transfer certificate from the insurance company to be able to continue the benefit. Just remember that there should not be a gap of more than 90 days between the expiry date of your insurance policy and renewal. NCB transfer rules suggest that the benefit cannot be transferred to a new owner of the vehicle in case of a sale, as the NCB is associated with the car owner and not the car.

Here’s a list of documents that are needed during the NCB transfer. Note that different insurance companies might ask for a different combination of the following documents.

If you want to retain your No Claim Bonus even after making a claim, you need to buy the No Claim Bonus Protection Add-on along with the Comprehensive policy. Usually, with that car insurance add-on, you can raise two claims in a policy year without losing the accumulated NCB.

IDV and NCB are two terms that are closely associated with car insurance premium calculation. IDV = Insured Declared Value. It is the value of the car taken into consideration for premium calculation, which can be determined using any IDV calculator. As NCB is a discount that comes into action after a no-claim policy period, it affects the premium calculation during policy renewal.

Listed below are important pointers related to NCB in India.

The No Claim Bonus gets terminated in the following event:

An NCB Protect cover gives you extra cushioning. It keeps the bonus component intact even if some claims (depending upon the terms and conditions) are raised during the policy period. You can opt for NCB protection cover to benefit from the renewal discount irrespective of a claim (or claims) during the policy period.

Listed below are some of the common myths associated with NCB cover: