Car insurance protects you against losses due to damage to the car, theft, accidents, and more. It ensures that you do not have to face the burden of hefty third-party liabilities or own damage repair costs. But, do you know that car insurance also rewards you for protecting your car and being a responsible driver? Yes, you read it right. Car insurance benefits you not only by protecting you from financial losses but also promises a No Claim Bonus (NCB) for every claim-free year.
Insurance providers offer NCB as a discount on the premium amount at the time of policy renewal. You get a percentage of discount as NCB for every claim-free year. The discount can go up to 50% if you do not claim insurance for five consecutive years. Here’s all you need to know about NCB and its benefits.
How does NCB work?
If you complete your insurance policy term without making a claim, then your insurer will give you a discount at the time of policy renewal. The discount is extended on the own damage part of your insurance policy and does not apply to third-party insurance. NCB begins at 20% of the premium amount and can go up to 50% with each consecutive claim-free year. This means if you do not make any claim for three years, your insurer will give you a bigger discount than 20%.
Usually, NCB is not provided to commercial vehicles. However, in some cases, insurers may give you the chance. Such conditions are based on their discretion
NCB works in two ways:
- It motivates you to be a responsible driver and rewards you for taking care of your car.
- With discounts of up to 50%, NCB promises big savings in the long term. It gives you the same coverage at a lesser cost.
Benefits of NCB
Comprehensive car insurance comes with NCB benefits. The higher premium cost for comprehensive coverage can be easily managed by protecting your NCB. Some benefits of NCB include:
You can reduce your premium amount at the time of policy renewal by using the NCB discount. Since the premium is not a small amount, this takes a substantial burden off your shoulders. And, the longer you stay claim-free, the higher the amount of premium you can reduce.
NCB is for the policyholder
The best thing about NCB is that it is given to the policyholder and not their car. Understand it this way—if the discount is given to your car, you will lose it if you sell or replace your car with a new one. Since it is given to the owner, you can use it to enjoy a discount on your new car’s policy premium. Of course, the condition remains the same—renew the policy before it expires.
A No Claim Bonus helps you save 20-50% on your premium amount. The discount percentage depends on the number of years you have spent claim-free.
No Claim Bonus can be easily transferred from one insurance provider to another. When switching insurers, just ask for your NCB certificate and submit it to your new insurance provider. This way you can continue to enjoy the NCB benefits.
Why is NCB important?
A car is a huge asset; most people spend a good part of their savings on buying and maintaining their cars. Also, car owners must have car insurance to be able to drive their cars on Indian roads. If you seek exhaustive coverage for your car, then you must get comprehensive car insurance. However, it costs more than mandatory third-party insurance. It means you spend a considerable amount of money on car insurance during the vehicle’s lifetime. To reduce the financial burden and motivate you to care for your car, insurance providers offer NCB.
On the other hand, it also helps insurance providers as they receive fewer claims. The benefits of NCB discourage car owners from making claims for trivial issues. Therefore, both the insurer and the insured receive benefits.
How is NCB calculated?
While the specific details of NCB can vary with different insurance policies and providers, the general method remains the same. NCB starts from the second year of insurance purchase and typically begins with a 20% discount. It is not calculated on the third-party component of the premium. It applies only to the own damage part of the policy.
The percentage discount is as follows:
- First claim-free renewal: 20%
- Second claim-free renewal: 25%
- Third claim-free renewal: 35%
- Fourth claim-free renewal: 45%
- Fifth claim-free renewal and onwards: 50%
Termination of NCB
No Claim Bonus is terminated by the insurer in two cases:
- When a claim is made during the policy year
- When the policy is not renewed within 90 days from the date of expiry
Another crucial thing to remember is the consequences of declaring a wrong NCB amount. The result can be grave, even if done unintentionally. Your insurance provider can reject your insurance claim because of it. In case you are switching your insurance provider, be careful while providing the NCB details.
What is an NCB protector?
Sometimes, it becomes necessary to make a claim. Even if you are careful on the road, you cannot make others do the same, and making a claim becomes inevitable. However, it resets your No Claim Bonus. To avoid this from happening, the policyholders can purchase an NCB protector. NCB protector is an optional but recommended feature. It will help you be more at peace while driving.
NCB protector protects your NCB slab when you have to make a necessary claim. For example, if you have a slab of 25% and make a claim the next year, having an NCB protector will ensure that you receive a 25% discount on the next renewal as well.
There are certain cases when the NCB protector is not applicable. Read your policy documents well before purchasing the policy.
The general situations when it is not applicable include:
- When the number of your claims exceeds the number allowed under the NCB protector
- When you do not renew the policy on time
- Your vehicle is not repaired in an authorized repair shop
- In cases of fraudulent claims
NCB is an added benefit of having car insurance. It is necessary to remember that even if you are 100% responsible while driving, you cannot make others do the same. This is where the NCB protector helps. Both NCB and NCB protectors can significantly bring down your premium amount.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.