No Claim Bonus (NCB) is a term used in car insurance that refers to a discount given to policyholders who do not make any claims during the policy term. It rewards safe and responsible driving behavior, encouraging drivers to avoid accidents and drive defensively. In this article, we’ll take a closer look at how NCB works and what benefits it offers.
What is No Claim Bonus?
No Claim Bonus, or NCB, is a reward system designed to encourage safe driving and reduce the number of accident claims made by policyholders. It is a discount offered by insurance companies to policyholders for every year they go without making a claim on their car insurance policy.
The NCB discount usually ranges from 20% to 50% on the own damage premium component of the policy. This means that if your annual car insurance premium is Rs. 10,000, and you have an NCB discount of 20%, then you will only need to pay Rs. 8,000 for your next year’s car insurance premium.
How Does NCB Work?
NCB is applied to the Own Damage (OD) component of your car insurance policy. If you don’t make any claims during your policy period, you earn an NCB discount, which increases every year. The percentage of NCB discount increases as per the below table:
– 1st year – 20%
– 2nd year – 25%
– 3rd year – 35%
– 4th year – 45%
– 5th year – 50%
If you make a claim during the policy period, you lose your NCB discount. However, you can retain your NCB even if you change your car or insurer. You can transfer the NCB earned on your old car to your new car.
Benefits of NCB Discount
NCB discount offers several benefits to car insurance policyholders, including:
1. Lower Premiums – The most significant benefit of NCB is that it reduces your car insurance premiums. The longer you go without making a claim, the more discount you receive on your premium.
2. Transferable – NCB is transferable from one insurer to another and from one car to another. If you sell your old car and buy a new one, you can transfer the NCB to your new car.
3. Encourages Safe Driving – NCB encourages safe driving behavior by rewarding drivers who don’t make any claims during their policy period. It’s a win-win situation for both the policyholder and the insurer as it reduces the number of claims made, which in turn reduces the financial burden on insurers.
4. Comprehensive Coverage – Policyholders with an NCB typically opt for comprehensive coverage, which offers better protection against theft, damage, and other risks.
Things to Consider
NCB discounts are not applicable to third-party liability insurance. They only apply to Own Damage (OD) component of the policy. Policyholders who have claimed during the previous year must renew their policies within 90 days of the policy expiry date to retain their NCB discount.
Policyholders should also note that making small claims can result in losing their NCB discount, which may lead to higher premiums over time. It’s essential to weigh the cost of repairs versus the loss of NCB discount before making a claim.
Conclusion
No Claim Bonus is a discount offered by insurance companies to car owners who do not make any claims during their policy period. It rewards safe driving behavior, which ultimately lowers the number of claims made by policyholders. The longer you go without making a claim, the higher the discount you receive on your car insurance premiums. NCB is transferable from one car to another and from one insurer to another, encouraging policyholders to switch to better plans with other insurers. It’s important for policyholders to weigh the cost of repairs versus the loss of NCB discount before making a claim, as small claims can result in losing their NCB discount and higher premiums over time.
