5 Things to Know About No Claim Bonus (NCB) in Car Insurance

If you're new to the concept or want to grasp its advantages more clearly, this post is your guide. Discover the top five things you need to know about NCB in car insurance.

What is a No Claim Bonus (NCB)?

A No Claim Bonus is a reward that insurance companies offer to policyholders for not making any claims during a policy year. It is essentially a discount on your car insurance premium at the time of renewal. The longer you go without making a claim, the higher the NCB percentage you accumulate. This bonus starts at 20% for the first claim-free year and can go up to 50% over several years. For example, if your annual premium is INR 10,000 and you have a 20% NCB, you only need to pay INR 8,000 at renewal. This reduction in premium cost can be quite significant over time, making it a valuable aspect of your vehicle insurance policy.

Benefits of No Claim Bonus

Discover how NCB can make your car insurance more affordable and beneficial for safe driving.

• Premium Reduction: The primary benefit of NCB is the reduction in your insurance premium. By not making any claims, you can save up to 50% on your premium over the years. This makes car insurance more affordable for responsible drivers.
• Encourages Safe Driving: Since the NCB rewards claim-free years, it encourages drivers to be more cautious and avoid small accidents. This not only helps keep the roads safer but also ensures lower insurance costs.
• Transferable Benefits: One of the great features of NCB is its transferability. If you decide to switch your insurance provider or buy a new car, you can transfer your accumulated NCB to the new policy. This means you don't lose the benefits you've earned, even if you change insurers.

How to Retain and Maximise Your NCB

Learn how to preserve and maximise your NCB for continued savings on your car insurance:

• Avoid Small Claims: One of the best ways to retain and maximise your NCB is to avoid making claims for minor damages. If the repair cost is low and manageable, it's better to pay out of pocket rather than filing a claim. This way, you can keep your NCB intact and continue to enjoy premium reductions.
• Timely Renewals: It's crucial to renew your car insurance policy on time to maintain your NCB. If there is a lapse in your policy renewal, you might lose the accumulated NCB.
• NCB Protection Add-on: Some insurers offer an NCB protection add-on, which allows you to make a certain number of claims without affecting your NCB. This can be particularly useful if you have to make a claim but don't want to lose your accumulated benefits. Consider this add-on to safeguard your NCB even when you need to make a claim.

Challenges and Considerations

• NCB Expiry: One of the challenges with NCB is that it can expire if you don't renew your policy on time. If you fail to renew within this period, your NCB resets to zero, and you lose all the benefits you've accumulated over the years. Therefore, timely renewal is essential to keep your NCB benefits intact.
• Limits and Exceptions: NCB is applicable only on the own damage component of your car insurance premium, not on the third-party liability component. Also, the maximum NCB you can accumulate is generally capped at 50%, regardless of how many consecutive claim-free years you have. Moreover, any claim you make will reset your NCB to zero, except if you have an NCB protection add-on.

Impact on Insurance Premium Calculation

• Significant Savings: The NCB percentage directly influences the amount you save on your car insurance premium. With each claim-free year, your NCB percentage increases, resulting in a lower premium. For example, after five consecutive claim-free years, you can save up to 50% on your premium. This can lead to substantial savings over time.
• Encourages Long-term Financial Planning: Understanding how NCB works can help you plan your finances better. By maintaining a claim-free record and accumulating NCB, you can reduce your long-term insurance costs. This is particularly beneficial for those who own multiple vehicles or use their cars extensively.

Understanding the No Claim Bonus and how it works can significantly benefit you as a policyholder. By driving safely, avoiding small claims, and ensuring timely renewals, you can maximise your NCB and enjoy substantial savings on your car insurance premium. Always consider the benefits of NCB when choosing a vehicle insurance policy and make informed decisions to get the most out of your insurance coverage. Remember, insurance is a tool to protect you financially, and managing it wisely can lead to significant savings and better financial health. If you're looking for a reliable insurance provider, consider options like Bajaj Allianz General Insurance Company, known for its comprehensive coverage and customer-friendly policies. By understanding these five key aspects of NCB, you can make the most of your car insurance and drive with peace of mind. *Standard T&C Apply **Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions. ***Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale. ****Claims are subject to terms and conditions set forth under the motor insurance policy.