What is NCB in Car Insurance and How Does It Work?

No Claim Bonus (NCB) is one of the best privileges that car insurance offers to the insured person. It encourages policyholders not to make any claims during the year under the policy period. In the long run, NCB can help you lower your insurance premium.

Let’s learn more about what NCB is and how it works. 

What Is NCB in Car Insurance?

NCB is defined as No Claim Bonus. It’s a rebate given by insurance companies to a policyholder who has not made a claim for a particular policy period, which is often one year. Your No Claim Bonus increases with the number of years you can drive without making a claim.

It applies to the part of the car insurance policy that you have to pay out of your pocket to shield your vehicle from damages or losses, often known as the ”own damage” premium. It is not applicable to third-party insurance, which is compulsory but has a fixed premium payable to the insurer.

How Does NCB Work?

No Claim Bonus works to your benefit by shaving off the premiums for the car insurance each time you do not make any claims within the year. The discount begins at 20% for the first year that the owner of the vehicle has not made a claim and rises gradually each year without a claim. The discount can reach 50% if the driver hasn’t filed any claims for the past five years.

Here is the typical NCB structure:

• 1st claim-free year: 20% discount
• 2nd claim-free year: 25% discount
• 3rd claim-free year: 35% discount
• 4th claim-free year: 45% discount
• 5th claim-free year: 50% discount

This means after five years of not filing a claim, you can get a 50% discount on your damage premium.

How NCB Affects Your Premium?

Let’s say your own damage premium is ₹10,000. 

• After 1st claim-free year: 20% NCB → Premium becomes ₹8,000
• After 2nd claim-free year: 25% NCB → Premium becomes ₹7,500
• After 3rd claim-free year: 35% NCB → Premium becomes ₹6,500
• After 4th claim-free year: 45% NCB → Premium becomes ₹5,500
• After 5th claim-free year: 50% NCB → Premium becomes ₹5,000

This progressive reduction in premium helps save a significant amount over time.

How To Retain Your NCB?

1. Avoid Filing Claims for Minor Damages

For small dents or scratches, check if the repair cost is less than your deductible. If it is, avoid making a claim to keep your NCB intact.

2. Pay Out of Pocket for Minor Repairs

It is often more cost-effective to pay for minor repairs yourself instead of losing your NCB by filing a claim.

3. Remember NCB Only Applies to Own Damage Premium

NCB is only applicable to the damage portion of your car insurance. It does not apply to third-party claims.

4. Third-Party Claims Do Not Affect NCB

If you file a claim under third-party insurance (for damage caused to others), your NCB remains unaffected.

5. Renew Your Policy on Time

Ensure timely policy renewal, as NCB can lapse if the insurance expires for more than 90 days.

Also, note that NCB is admissible only to the damage portion of the premium. If an individual opts for a third-party insurance claim, the NCB of the vehicle will not be affected at all.

Can You Transfer NCB?

Yes, NCB is transferable. In simple terms, if you sell off your old car and buy a new car, you can actually transfer your NCB to the new car insurance policy. The same applies if you change your car insurance company. NCB is not attached to the car but to the individual, and whatever credit balance you had when changing your car is transferable.

In order to transfer the NCB, you must present a copy of the NCB certificate issued by the previous insurance company. This helps you to remain eligible for the discount that you have embraced in the course of your driving.

What Happens to NCB After a Claim?

If you make a claim, your NCB will return to zero unless you have an NCB protection add-on. Without this add-on, even a single claim will negate the years of accumulating the discount. This means that you will have to start right from scratch and rebuild your NCB all over again.

NCB Protection Add-on

The NCB in car insurance lets you claim one or two times within the stated policy duration without invalidating your NCB. This particular add-on makes it a perfect fit for drivers who are interested in keeping their No Claim Bonus intact despite claiming on their policy.

However, this add-on cost depends on the insurance company, which generally charges a small percentage of the premium. Some policies may cost you more for the overall premium amount, but the money that you will be saving in the long run to retain your NCB will be worth it.

Does NCB Expire?

Yes, NCB can expire. Remember that once your car insurance policy expires, your No Claim Bonus expires in 90 days. After this period, it is hard for you to take advantage of the accumulated bonus. To ensure you do not fall into this category, you must renew your policy on time.

Furthermore, if a policyholder does not own a car for three years or more, the NCB becomes invalid. But if you purchase a new car within them, you can still utilise your NCB.

NCB on Different Types of Car Insurance

1. NCB on Comprehensive Car Insurance

NCB is popular among car owners, especially when taking comprehensive car insurance. This type of insurance protects both the third party and the policyholder/vehicle owner in the case of an accident. The NCB discount applies to the damaged part of the premium.

2. NCB on Third-Party Insurance

NCB is not valid for third-party car insurance as the respective authorities set the premiums for this type of insurance from time to time. No Claim Bonus is only available to keep a clean record free from own damage claims.

Key Benefits of NCB

1. Saves Money

The most significant benefit of NCB is the savings it offers. A 50% reduction in the damage premium is substantial, especially when considering the long-term costs of car ownership.

2. Rewards Safe Driving

NCB encourages safe driving. By avoiding accidents and claims, you are rewarded with a lower premium. This promotes responsible behaviour on the road.

3. Transferable Between Insurers

One of the best things about NCB is that it is transferable. Even if you switch insurance companies, you won’t lose the discount you’ve built up over the years.

4. Can Be Protected

If you are concerned about losing your NCB after a claim, you can opt for the NCB protection add-on. This add-on gives you peace of mind, knowing that you won’t lose the discount after making a claim.

Conclusion

By understanding how NCB works and following best practices to retain it, you can save a significant amount on your car insurance. Remember, NCB only applies to your damage premiums, and to maximise your savings, it’s best to avoid making claims for minor damages.

With a bit of attention and careful planning, NCB can save you a lot on your car insurance over the years!