What is a No Claim Bonus (NCB)? When it comes to car or bike insurance, one term that often catches the attention of policyholders is No Claim Bonus (NCB). It is a reward given by insurance companies to policyholders for not making any claim during the policy year. Over time, NCB can lead to significant savings on your insurance premium. In this article, we will explore NCB in detail—its meaning, benefits, calculation, transfer process, and its impact on your vehicle insurance.
✅ 1. Meaning of No Claim Bonus (NCB)
No Claim Bonus (NCB) is a discount or reward provided by insurance companies to policyholders who do not make any claim during the previous policy year. This benefit is applicable only on the own-damage (OD) premium portion of the insurance policy and not on the third-party premium, which is mandatory as per Indian Motor Vehicles Act.
In simple terms, if you drive your vehicle safely and don’t file any insurance claims during the year, the insurance company appreciates your responsible behavior by offering a discount on the next year’s premium.
✅ 2. How Does No Claim Bonus Work?
Let’s take an example:
Suppose you buy a car insurance policy with a premium of ₹10,000 (₹6,000 OD + ₹4,000 TP). You do not make any claims during the first year. So, when you renew your insurance, you receive a 20% NCB on the OD component (₹6,000), which means you get ₹1,200 off.
This discount increases every consecutive year if no claim is made, up to a maximum limit of 50%.
✅ 3. NCB Discount Structure
The NCB discount increases with each consecutive claim-free year as shown below:
| Claim-Free Years | NCB Discount |
|---|---|
| 1st Year | 20% |
| 2nd Year | 25% |
| 3rd Year | 35% |
| 4th Year | 45% |
| 5th Year | 50% (Max) |
If you make a claim, the NCB resets to 0% and you will have to start the ladder again from the next policy year.
✅ 4. Key Features of NCB
- Available Only on OD Premium: NCB applies only to the own-damage portion, not on third-party cover.
- Reward for Safe Driving: It promotes cautious and responsible driving habits.
- Transferable Benefit: NCB is linked to the policyholder, not the vehicle, and can be transferred when you buy a new vehicle.
- Incentive for Not Claiming Minor Damages: Helps reduce unnecessary small claims.
✅ 5. Benefits of No Claim Bonus
i. Reduced Premium:
The primary advantage of NCB is a lower renewal premium. With each claim-free year, you save more money.
ii. Encourages Safe Driving:
Since drivers are rewarded for not claiming, it motivates safe and disciplined driving.
iii. Transferable Between Insurers:
NCB can be transferred if you switch to another insurer at the time of renewal, so you don’t lose your reward.
iv. Applicable on New Vehicle:
Even if you sell your old vehicle and buy a new one, you can carry forward your NCB.
✅ 6. How to Preserve NCB?
Here are a few tips to maintain your No Claim Bonus:
- Avoid Claiming for Small Damages: If the repair cost is less than the NCB discount you will lose, avoid filing the claim.
- Drive Responsibly: Safe driving is the key to a claim-free year.
- Use NCB Protection Add-on: This add-on allows you to retain NCB even after making one or two minor claims in a policy year.
- Don’t Miss Renewal Dates: Renew your policy on time to retain the NCB. A break in policy of more than 90 days can lead to NCB loss.
✅ 7. What is NCB Protection Add-On?
NCB Protection is an optional add-on cover offered by many insurers. This allows you to retain your current NCB discount even after making a claim. Generally, it is allowed for 1 or 2 claims per year depending on the policy terms.
For example, suppose you have a 50% NCB and make a small claim for a dent repair. Without NCB protection, you’ll lose your entire 50% discount. But with the NCB protection cover, you retain your NCB and still get a discount next year.
This add-on is ideal for:
- Owners of new or high-value vehicles
- Policyholders with maximum NCB (45%-50%)
✅ 8. Transfer of No Claim Bonus
As mentioned earlier, NCB is linked to the policyholder, not the vehicle. You can transfer your NCB in the following scenarios:
i. When Buying a New Vehicle:
You can transfer the NCB from your old car to your new one. You’ll need to provide an NCB certificate or proof from the previous insurer.
ii. When Changing Insurer:
If you switch insurance companies, your NCB is still valid. The new insurer will ask for an NCB retention letter or proof of your previous policy’s claim-free status.
iii. Sale of Old Vehicle:
Even after selling your vehicle, you can retain your NCB and use it for the new one.
Documents Required for NCB Transfer:
- NCB certificate from previous insurer
- Copy of old insurance policy
- Sale document of old vehicle (if applicable)
- Application for NCB transfer
✅ 9. What Happens if You Make a Claim?
If you make a claim in any policy year, your NCB will be reset to 0% at the time of renewal. This means you’ll lose the discount you were previously enjoying. However, some insurers may offer partial NCB retention for very minor claims, but that depends on policy terms or add-ons.
✅ 10. NCB in Bike Insurance
Just like car insurance, bike insurance policies also offer NCB benefits. The rules, percentage slab, and transfer process are exactly the same. This makes it a valuable benefit for two-wheeler owners who ride responsibly and maintain their vehicles well.
✅ 11. FAQs About No Claim Bonus
Q1. Can I transfer NCB to another person?
👉 No, NCB is not transferable to another person. It is only applicable to the same policyholder.
Q2. Is NCB applicable on third-party insurance?
👉 No, NCB is only applicable to the own-damage component.
Q3. Will I lose my NCB if my policy expires?
👉 If the policy is not renewed within 90 days of expiry, your NCB benefit will lapse.
Q4. What if I switch to a different insurer?
👉 Your NCB can still be used with a new insurer, provided you submit proof of NCB.
Q5. Is it worth buying an NCB protection add-on?
👉 Yes, if you have a high NCB (e.g., 50%) or a high-value vehicle, it is a cost-effective option to protect your accumulated benefit.
✅ 12. Conclusion
No Claim Bonus (NCB) is a smart way to reduce your insurance premium while promoting safer driving. It not only saves money but also gives you the satisfaction of maintaining a clean driving record. Whether you own a car or a two-wheeler, understanding how NCB works can help you make informed decisions about claims and renewals. Also, don’t forget to consider the NCB Protection add-on, especially if you have built up a high discount over the years.
By making conscious choices and avoiding small claims, you can enjoy the full benefits of this valuable reward in your insurance journey.