What is NCB in Car Insurance? Car’s Finance

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NCB in car insurance stands for ‘No Claim Bonus. It is a bonus in the form of a discount on the premium amount that the insurers give when the policyholders renew the insurance policy. NCB applies only if the insured makes no insurance claim in the previous years.

Understanding How ‘No Claim Bonus’ Works

You have to renew the car insurance policy once it expires. The policy validity can vary from 1 year to that of 3 or 5 years. If the insurance holder makes no claim in the existing policy, then s/he can claim NCB in the car insurance. It gets invalid if you make a claim and there is no discount in the next renewal policy irrespective of the number of years the policyholders did not make a claim.

The insurer provides NCB on every renewal year as long as the insured does not make any insurance claim. The discount percentage ranges between 20% and 50%. It keeps increasing annually. However, the insurers provide a No Claim Bonus in the car insurance up to a maximum of 50%.

Features of NCB in Car Insurance

Below are the important features of NCB in car insurance that the policy buyers need to know:

  • NCB in car insurance is not for third-party liability. Hence, it is applicable on the ‘comprehensive bike insurance policy or ‘own damage cover’
  • It is applicable only on renewal and not on the first policy that the insured buys
  • The bonus percentage increases by 5%-10% every year up to 50%. There is no higher percentage of discount awarded after 50% of the premium amount. The table below gives an approximate of year-wise discount rates on premiums through No Claim Bonus:
Year NCB in Car Insurance
After 1 year 20%
After 2 years 25%
After 3 years 35%
After 4 years 45%
After 5 years 50%
Approx. Year-wise Discount Percentage in NCB
  • NCB in car insurance is calculated on the Insured Declared Value (IDV) of the car, whereas, IDV is minus the cost of its depreciation from the actual cost
  • Discounts of No Claim Bonus can not be shared between two policies
  • You cannot transfer the discount benefit if you sell the vehicle. It is because NCB is granted to the owner and not the vehicle. However, you can transfer it from an old four-wheeler to a new car

Can NCB in a Car Insurance get canceled?

Yes, NCB in car insurance can get canceled for many reasons. It is invalid if there is a previous insurance claim. But, it is also inapplicable in the following situations:

  • If you fail to renew the insurance policy within 90 days of the expiry of the previous one. Then, NCB is canceled in such a case
  • The policyholder cancels one’s own chance to claim bonus/discount on renewal policy premiums when s/he cancels the insurance policy before its expiry. The discount goes in waste for the particular year goes to waste if the policy is canceled before the completion of the tenure
  • One has to submit the retention letter to the insurer to transfer the NCB in car insurance from an old car to a new one. In case you miss it, you miss the NCB benefits

Advantages of NCB in a Car Insurance

NCB in car insurance has many benefits for the insurance holder such as:

  • The policyholder gets a cheaper deal of insurance policy. So, one has to pay lower premiums in the policy renewal years
  • Insurers reward you with a token of appreciation in form of a premium discount
  • It encourages people to drive safely. They know if they injure themselves or damage the car, they will either have to pay themselves or claim insurance. They will lose the NCB benefits if they make the claim. Hence, they will avoid reckless driving
  • It is easy to transfer and switch the No Claim Bonus from one insurer to another upon renewal. Although the discount is not transferred from one owner to the other, the insured can choose out of many insurers. Even if the policyholders change the insurance provider in the renewal policy, they are still eligible for NCB
  • You can also carry forward this bonus from the old car to a new one. This is one of the major benefits. All you need to do is to submit all the relevant documents to the insurance provider

Benefits for the Insurance Provider

The insurance companies incur a huge financial cost when they pay out the insurance claim. They would rather benefit from giving discounts on the premium than the huge amount of insurance money payments. Therefore, they encourage the policy buyers to drive safely to avail of the benefit of NCB in car insurance.

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