What is a No Claim Bonus in Car Insurance Policy? Full Guide

no claim bonus in car insurance
NCB (No Claim Bonus)

No Claim Bonus in short is called NCB. It is a reward given to the policyholder when doesn’t file any claim in his or her car insurance policy for the policy year. As the name shows it is a kind of bonus or reward that is given to the customer.

In simple words, it is a discount on the premium (own damage) which is given to you when you don’t make any claim in your previous policy.

You get a 20% bonus when you don’t file any claim in first policy year. You can accumulate it up to 50% when you don’t file any claim for 5 consecutive years. If you file any claim in any year this will become zero. But in case you have NCB Protection then you may protect your bonus.

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NCB Eligibility

CLAIMSNO CLAIM BONUS(%)
If no claim within one year of the policy20%
No claim in two consecutive years of policy25%
If no claim in three consecutive years of policy35%
No claim in four consecutive years of policy45%
If no claim in five consecutive years of policy50%

To better understand, I am giving you some examples:

Example 1:

Suppose you purchase an insurance policy on your car or bike. Now you are completing your one year of policy and you didn’t make any claim. Now if you will renew your policy then you are eligible for 20% of the No Claim Bonus. This means you will get a discount of 20% on the own-damage premium of your policy on renewal.

Now you are completing two years of your policy and you take no claim in the last two years of your policy. Now at the time of renewal, you are eligible for 25%. It means you will get a discount of 25%.

CLAIMSNO CLAIM BONUS(%)
If no claim within one year of the policy20%
If no claim in two consecutive years of policy25%

Example 2:

Suppose you didn’t make any claim for two consecutive years and you get a bonus of 25%. But in the third year, you make a claim in your car insurance policy. At the time of renewing the policy, your eligibility for a claim bonus will be zero.

CLAIMNO CLAIM BONUS(%)
If no claim within one year of the policy20%
If no claim in two consecutive years of policy25%
The claim was taken in the third year of the policy0%

Why No Claim Bonus?

With the above example, you noticed that you get the bonus only when you are not taking any claim in your policy. What is the meaning of it? It is clearly indicating that you are driving your vehicle safely. You care for your vehicle and yourself and drive it safely that’s why you make no claim from your insurance company.

So, No Claim bonus is given for safe driving and not making any claim. It also discourages filing small claims. I also suggest that you should not file a small claim. Later in this blog, I will let you know how it is beneficial for you.

Now many questions may be running through your mind like:

  • What if you sold out your car?
  • Can you transfer your No Claim Bonus or not?
  • Can you get any No Claim Bonus certificate from your insurance company?
  • Can you transfer your bonus to another person or not?
  • Bonus is given to you or your car?
  • Why you should avoid small claims?
  • What if you transfer your policy from one company to another?
  • Do you have to provide any proof at the time of renewing the policy to another company?

In this blog, I will cover all the above doubts.

No Claim Bonus is Connected to You or Your Vehicle?

It is connected to the policyholder, not to the vehicle. For example, you have an old car and its insurance policy has no claim bonus of 35%. Now you want to sell this car and want to purchase a new one.

In this case, you can get an NCB certificate from your insurance company in your name. Now you can submit this NCB Certificate to a new insurer and take an NCB discount on your new car insurance policy.

In case you sold out your car to another person and you have also transferred the insurance policy to the new owner. In this case, available NCB will not be transferred to the new owner. You are not allowed to transfer your No Claim Bonus to any other person.

Is NCB Available for Third-Party Cover?

No claim bonus is not available for the third-party policy. It is always connected to its own damage premium component of the policy. This means you cannot avail of this discount on the third-party components. If you have only a third-party policy and continuously renewing as well without any claim. It doesn’t mean that you will get any No Claim Bonus.

Either you have a Package policy or only your own damage premium policy in both cases you will get an NCB discount only on your own damage part. This discount is also not applicable to add-on covers.

Avoid Small claim

As I explained above if you make any claim in your policy then you are not eligible for a No Claim Bonus. It does not matter whether the claim is a small or big one. You will lose it in both cases.

But the most important question for you that a small claim is really beneficial for you or not. I will advise avoiding small claims as much as possible. Check the basic calculation and take the decision accordingly. With the help of the below example, you can get the idea:

Suppose Mr. A is renewing his policy in the last four years and didn’t file any claim also. He is now eligible for an NCB of 45%. He is getting a discount of Rs.8000. But in case he got a claim of Rs.4000 in the preceding year and his no-claim bonus becomes 0. Now you can check he will lose Rs.4000 (Rs.8000 – Rs.4000).

no claim bonus small claim
Small claim

So, in this case, which one is better taking a claim of Rs. 4000 or avoiding the claim and bonus of 45%? Of course, to avoid small claims. Insurance companies also give tariff discounts on the Basic premium. Most companies give fewer discounts for cases that have zero NCB and higher discounts for NCB cases.

Transfer of No Claim bonus For New Car

Suppose you have an old car and there is 35% NCB in your running car insurance. Now you want to sell this car and want to purchase a new one. In this case, you can retain the NCB of your car insurance policy even if you transfer the policy to the new owner of the car.

You need to obtain a claim bonus certificate from your existing insurance company by submitting a request letter and other required documents like form 29 and form 30 (Buyer Seller Agreement) etc.

After that, your company will issue a No Claim Bonus certificate. To avail of this in your new car now you need to submit this certificate to your new insurance company. And you will get an applicable discount for NCB.

If Switch Your Insurance Company Offline or Online

If you want to renew your existing insurance policy with another insurance company offline then need to submit a renewal notice or previous policy document to the new insurer to avail of the NCB. A new insurance company may cross-verify it for your previous insurer.

In case you are buying a policy online then normally there is no need to submit any documents for NCB. However, it depends on company terms. It’s done only on behalf of your declaration. But it doesn’t mean that you suppress any claim and declare any NCB to get maximum benefits.

The latter company always verifies your claim and the No Claim Bonus status for your previous insurer. If it is found that you have mentioned the wrong bonus then the company has the right to reject your claim or can also cancel your insurance policy.

NCB & Death of Policyholder

Suppose someone is having an insurance policy and no claim bonus is also available. But due to some reason, the owner of the car died. Now what? In case of the death of the policyholder if his or her legal heir is taking the transfer of the car in his or her own name then NCB may also be transferred to the same name. This is the only case where a person-to-person transfer is allowed.

NCB Termination

Ideally, you should renew your insurance policy on time but in case there is any delay in renewal. To get the benefits of the No Claim Bonus you need to renew the policy within 90 days of the expiry of your insurance policy.

If you do not renew your existing car insurance policy within 90 days of expiry then this bonus gets terminated. Now if you will renew your policy then you will not get the NCB discount.

No Claim Bonus Add-On

Some companies provide add-on cover to protect no claim bonus in case of claims during the policy period. This is up to you to take this add-on or not. You can take this after paying an additional premium.

Insurance companies have some terms and conditions also like a limited number of claims etc. Different companies have different rules for no claim bonus protection.

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