Your car insurance provider cares a lot about your safety and the safety of your car. Hence, it rewards you for every accident-free or damage-free year that you’re able to push through. This reward is commonly known as a no-claim bonus (NCB) in car insurance.
You can earn a discount on your premium payments for every year that you don’t file a claim through that policy. Five consecutive claim-free years can bring you a discount of up to 50%. Moreover, insurance companies offer you the chance to safeguard your NCB in car insurance from termination through the NCB Protection cover.
Features of No-claim Bonus
Here are some of the crucial features of a no-claim bonus.
- Transferable Bonus:
NCB in car insurance is not lost if you decide to change your insurance provider. If you choose to shift your policy to a different insurance company, you can transfer the no-claim bonus. Hence, your NCB will remain the same despite switching providers.
- Discount up to 50%:
In some cases, you might be able to get the chance to pay only half the premium price for your car insurance. If you do not make any claims from your active policy for 5 consecutive years, you can earn a discount of up to 50%.
- Deduction upon Claiming:
Let’s assume that you made a claim during a particular policy year. That’s alright, since many insurance companies first assess the extent of the claim before reducing your NCB in car insurance. This means that an insurance provider will not necessarily cut down your no-claim bonus to nothing. In many instances, only a part of the NCB in car insurance is reduced but the right to make another claim during that policy year is taken away.
How Do No-claim Bonuses Work?
Given below is a simple table that can explain how an NCB in car insurance works. Please note that the number of claim-free years listed below has to be consecutive in order to earn a certain no-claim bonus percentage.
| Number of Claim-free Years | No-claim Bonus |
| 1 year | 20% |
| 2 years | 25% |
| 3 years | 35% |
| 4 years | 45% |
| 5 years | 50% |
Terms and Conditions of No-claim Bonus
Explained below are crucial terms and conditions of the NCB in car insurance that you must keep in mind. For a deeper understanding of other terms that are subjective to your car insurance policy, please read the policy documents carefully.
- Cancellation:
If you wait longer than 90 days post the renewal date to revive your car insurance policy, you might lose your no-claim bonus entirely. On the other hand, the NCB in car insurance could be reduced to 0% if you claim a substantial amount as coverage, perhaps for theft, total loss, total damage, etc.
- Third-party Coverage:
A third-party car insurance is compulsory as per the Motor Vehicles Act of 1988. However, you cannot build a no-claim bonus for such policies. NCB in car insurance is not applicable to third-party liability insurance plans.
- Applicability:
Contrary to the case of third-party insurance plans, no-claim bonuses can be applicable to standalone own-damage car insurance and comprehensive car insurance plans. Standalone own-damage car insurance plans offer coverage and financial protection against damages inflicted solely upon your own vehicle. Comprehensive car insurance combines third-party liability and own-damage car insurance to offer holistic and substantial coverage.
- Porting to New Vehicle:
If you purchase a new car, insurance companies will allow you to port that policy to your brand new vehicle. This is also applicable to an NCB in car insurance. However, in order to port your no-claim bonus, you must ask your insurer to issue a certificate.
How to Transfer a No-claim Bonus?
Here’s how you can transfer a no-claim bonus in car insurance from your older vehicle to your brand new one.
Step 1: Collect documents such as a copy of ownership transfer, registration documents of your new car, KYC documents, etc.
Step 2: Submit these documents to your insurer and ask for a transfer certificate
Step 3: Request the insurance company to transfer your existing NCB along with your car insurance plan
Et voila! The transfer process of your no-claim bonus should be closed shortly!
When Is a No-claim Bonus in Car Insurance Terminated?
Pointed out below are all the circumstances under which an NCB in car insurance could be terminated. Please commit these points to your long-term memory if you’d like to keep your no-claim bonus active.
- If you claim coverage, your NCB could be terminated or reduced.
- A No-claim Bonus Protection cover can save an NCB in car insurance from termination.
- Not renewing your car insurance policy within 90 days of expiration will lead to NCB termination.
- If you fail to transfer your car insurance policy and your no-claim bonus to your new car within the prescribed duration, your insurer will terminate your NCB.
How Can You Protect Your NCB in Car Insurance from Termination?
An NCB in car insurance can be maintained and protected with just a little discipline and precaution involved. All you need to do is drive safely and get the No-Claim Bonus Protection cover. Let’s consider the following scenario to understand what an NCB Protection cover is.
Let’s assume that you haven’t filed a single claim in the past 3 years. This means that your NCB should be 35%. However, due to an engine breakdown, you had to claim your Engine Protection cover add-on. This could decrease the percentage of your NCB or terminate it completely.
This could be entirely avoided if you have the NCB Protection Cover. If you request your insurer to activate or apply the protection of this add-on to your claim, they may not reduce or terminate your NCB.
Having understood how an NCB protection cover works, it’s time to also understand its inclusions and exclusions.
| Inclusions | Exclusions |
| Protects NCB from cancellation due to a damage-related claim | Total loss/theft claims |
| Can be added to own-damage and comprehensive car insurance only | Ineligible claim requests |
| Number of claims allowed differs from policy to policy | Claims with false information or fraudulent claims |
To Wrap It Up…
An NCB in car insurance may differ from one insurance company to another. However, its calculations remain the same across most companies and motor vehicle insurance plans. Hence, understanding the concept of NCB in car insurance and its subsequent calculations and terms is very important. It can prove very beneficial for you during renewals, purchases, or transfers of car insurance plans.
It helps you remain fully aware of your rights as a responsible driver and a disciplined policyholder. Moreover, you remain educated about NCB Protection Covers and its benefits. Hence, no insurance company or agent can cheat you into paying a higher premium than you’re supposed to. The more you know as a car insurance policyholder, the better!
