What is No Claim Bonus in Car Insurance Explained

Written by Sharad Bajaj

Updated On Oct 14, 20232 min read

What is No Claim Bonus in Car Insurance Explained

NCB in car insurance is a discount given to you as the policyholder at the time of renewing car insurance policy if no claims have been raised by you during the policy period. It is very beneficial as it allows you to save on some expenditure during the renewal of your car insurance policy and allows you to avail of a discounted premium at the time. The NCB discount increases by a certain percentage each year during the policy tenure when no claim is raised, and then can be applied at the time of policy renewal to avail of a reduced premium.

When is NCB Applicable?

NCB is applicable only on the premium for the own damage portion of the policy and does not cover any additional premium. Thus it is not applicable to the third-party liability premium. Therefore if the only insurance is third-party liability coverage then no NCB would be earned over the years of the policy tenure, even if no claims are raised during this time. Thus, NCB is only applicable to its own damage premium.

Secondly, it is only applicable at the time of renewal of the policy. At the initial stage of purchasing the policy, you cannot avail of the NCB discount. This is due to the fact that the discount is based on maintaining a claim-free record and at the time of purchase of the policy this record is not there, except in rare cases such as NCB transfers.

When can NCB be transferred?

An NCB discount is availed by you as the policyholder and applies to the individual who is purchasing the insurance rather than to the vehicle that is insured. Therefore, if you switch from one insurance policy to another at the time of renewal, thus purchasing a new policy, then the claim-free record from your previous policy would be applicable for you to avail an NCB discount even with the new policy.

Also, if you purchase a new vehicle, when insuring that vehicle you can avail of an NCB discount as transferred from your previous vehicle, if you have maintained a claim free record. Thus, the reward of NCB is associated with the policyholder and not the vehicle. You cannot, however, transfer the NCB from one person to another, except in cases where the legal heir is inheriting a vehicle from somebody.

Conclusion

No Claim Bonus is thus to be claimed at the time of renewal of a car insurance policy. It is availed by firstly maintaining a claim free record on your policy during the tenure, and is only applicable at the time of renewal rather than when new policies are purchased. However, an NCB discount may be transferred by you from one vehicle to another or one policy to another, but can only be transferred from one person to another in case of legal inheritance.

Disclaimer

This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

Written by Sharad Bajaj

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Sharad is an insurance industry veteran who has managed motor insurance products for over a decade. He helped set up and scale the motor insurance vertical for a leading insurance company in his previous stint. In his spare time, Sharad likes to read and be in tune with nature.