5 Things You Should Know About No Claim Bonus (NCB)
- ashlinj52
- Dec 31, 2024
- 4 min read
A No Claim Bonus (NCB) is a reward given by insurance companies to policyholders who do not make any claims during the policy term. This bonus is typically associated with motor insurance policies, although some health and home insurance policies also offer it. The NCB is designed to incentivize safe driving and prudent behavior, rewarding policyholders for not making any claims during the year.
If you're considering buying an insurance policy or already have one, here are 5 important things to know about No Claim Bonus:
1. What Is No Claim Bonus (NCB)?
A No Claim Bonus (NCB) is a discount offered by insurance companies on the premium for the next policy year, based on the claim-free history of the policyholder during the previous year. In simple terms, if you don't make any claims during your policy term, the insurer rewards you with a reduced premium when you renew the policy.
Motor Insurance: NCB is most commonly associated with car insurance and two-wheeler insurance. If you don’t make a claim during your policy term, you can get a discount of 20% to 50% on your renewal premium.
Health Insurance: Some health insurance companies offer NCB for policyholders who don’t make any claims during the policy year. This can result in higher coverage at the same premium during the next renewal.
2. How Does No Claim Bonus Work?
The way NCB works can vary slightly depending on the insurance provider, but in general, here's how it works:
Claim-Free Year: If you don't make any claims during your policy term, you are eligible for a No Claim Bonus.
Discount on Renewal: At the time of policy renewal, the insurance company offers a discount on your premium. This discount can range from 20% to 50% based on how many claim-free years you’ve had.
Gradual Increase: The bonus is usually accumulated over time. For example:
1 claim-free year: You might get a 20% discount.
2 claim-free years: The discount can increase to 25% or more.
The bonus can go up to 50% in some cases, typically after 5 or more years of claim-free history.
Renewal Premium: The discount is applied to the renewal premium, so you’ll pay less than you did the previous year, provided there are no claims in the previous year.
3. Does No Claim Bonus Impact the Coverage?
One of the biggest benefits of NCB is that it doesn’t affect your coverage; it only reduces the premium. This means:
You retain the same coverage or sum insured that you had in the previous year, but you pay less for it.
For example, if your car insurance covers ₹10 lakhs and you’ve accumulated a 30% NCB, the policy will continue to cover ₹10 lakhs, but your premium will be reduced by 30%.
However, some motor insurance companies also offer the option to increase the sum insured along with the NCB, which can give you enhanced coverage while keeping your premiums low.
4. Can You Transfer No Claim Bonus to a New Insurer or Vehicle?
Yes, in many cases, you can transfer your No Claim Bonus to a new insurance company or even to a new vehicle, but there are certain conditions:
Transferring NCB to a New Insurer:
If you switch from one insurance company to another, you can carry forward your No Claim Bonus.
To do this, you must provide the new insurer with a NCB certificate issued by your previous insurer.
The new insurer will verify the claim-free history and offer you a similar discount on your premium.
Transferring NCB to a New Vehicle:
If you buy a new vehicle, you can transfer the NCB from your old vehicle’s insurance policy to the new vehicle.
Typically, the NCB discount applies only if the new vehicle is of the same or lesser engine capacity (for motor insurance).
Ensure that the NCB transfer is done during the renewal process, as it is linked to the policy rather than the vehicle itself.
5. What Happens If You Make a Claim?
If you make a claim during the policy period, the No Claim Bonus is either reduced or nullified. Here’s what happens:
Claim During the Year: If you file a claim in the middle of the policy year, you won’t be eligible for the NCB at the time of renewal. The insurer may take back any bonus applied in the past or not offer a discount for the coming year.
Impact on Future Renewals: After making a claim, you will likely start at a standard premium rate again and lose the discount you had earned.
Partial NCB Benefit: In some cases, insurers may offer a partial NCB if you make a claim but still manage to maintain a claim-free record in subsequent years. Some companies also allow for discounts on partial claims.
Voluntary Excess: Some insurance policies allow you to pay a voluntary excess (an extra amount) to avoid losing your NCB even in the event of a claim. This helps you retain the bonus but increases your out-of-pocket expenses for claims.
Conclusion
The No Claim Bonus (NCB) is an excellent way to reward safe behavior and prudence in insurance. By maintaining a claim-free history, you can significantly reduce your premiums, enjoy higher coverage, and even transfer the benefits to a new vehicle or insurer.
Whether you’re renewing your motor insurance, health insurance, or another type of policy, always keep in mind that NCB is an incentive for not making claims but can be affected if you need to file one. Additionally, it’s crucial to understand the transfer policies and any conditions that might apply to ensure that you’re making the most of this valuable bonus.
Comments