Media post: How is No Claim Bonus Calculated in Car Insurance?

As a car owner, it’s essential to understand the mandatory insurance coverage requirement, vehicle registration, and PUC (Pollution Under Control) certification. According to the Motor Vehicles Act, having insurance is a legal obligation for all vehicle owners.

In addition to providing financial protection against damages, a car insurance policy offers additional benefits, including the No Claim Bonus (NCB). Keep reading to learn how the No Claim Bonus works in car insurance.

What is No Claim Bonus in Car Insurance?

The No Claim Bonus in a car insurance policy is a reward the insurer provides for not making any claims during the policy period. Often referred to as an NCB discount, this benefit reduces your premium when you renew your insurance after the policy expires.

The value of the No Claim Bonus depends on the number of claim-free years, with discounts ranging from 20% to 50%. If you had a 55% to 65% NCB in your previous policy, you could qualify for a higher NCB after an additional claim-free year.

Benefits of No Claim Bonus in Car Insurance

The No Claim Bonus is a valuable benefit in car insurance, rewarding policyholders for maintaining a claim-free record while encouraging safe driving practices. Some key advantages of No Claim Bonus in car insurance include:

– Recognition for Responsible Driving: The No Claim Bonus is a reward from insurers that encourages safe and responsible driving. If you maintain a claim-free record and avoid accidents, you can enjoy discounts on your car insurance premium at renewal.

– Linked to the Policyholder, Not the Vehicle: The No Claim Bonus is tied to the car owner, not the car itself. Even if you sell your vehicle, the bonus remains with you and can be applied to your next car’s insurance policy.

– Significant Premium Savings: The No Claim Bonus allows policyholders to save substantially on premiums, ranging from 20% to 50%, depending on how many years they go without making a claim.

– Easily Transferable: If you switch insurers, your No Claim Bonus is transferable. You only need to get a certificate from your current insurer and provide it to the new one, ensuring uninterrupted benefits.

How is No Claim Bonus in Car Insurance Calculated?

The No Claim Bonus is calculated based on the own damage portion of your car insurance premium and not the third-party liability component. Starting from the second year of your policy, the NCB begins at a 20% discount for the first claim-free year.

With each consecutive year of no claims, the discount increases progressively, reaching 50% after five claim-free years. Here’s a breakdown of NCB discounts based on claim-free years:

Let’s consider an example: Assume you pay an annual car insurance premium of Rs 20,000, where the own damage component amounts to Rs 18,000. Since he has maintained a claim-free record for five consecutive years, he qualifies for the maximum No Claim Bonus discount of 50%. This entitles him to a discount of Rs 9,000 on his own damage premium.

Can No Claim Bonus in Car Insurance Be Terminated?

No Claim Bonus can be terminated under several circumstances, making it crucial for policyholders to understand how to keep these benefits intact.

– Filing a Claim: The insurer will terminate your No Claim Bonus benefits if you claim the policy term. For instance, raising a claim for damages caused by an insured peril will nullify your No Claim Bonus. However, if you have a No Claim Bonus Protection Cover, your No Claim Bonus remains unaffected even after a claim.

– Non-renewal of Policy: Failure to renew your car insurance within 90 days of its expiry results in the termination of the No Claim Bonus. Regardless of the number of claim-free years accumulated, the insurer will not honour the No Claim Bonus if the policy lapses beyond the stipulated grace period.

– Policy Lapse: Allowing your policy to lapse entirely nullifies your eligibility for No Claim Bonus, even if you had accumulated years of claim-free discounts.

– Failure to Transfer NCB: If you don’t transfer your No Claim Bonus to a new insurer or car insurance policy within the specified timeframe, the insurer will withdraw your accumulated No Claim Bonus benefits.

What Happens to No Claim Bonus in Case of Accident or Theft?

The No Claim Bonus is affected if your vehicle is involved in an accident or is stolen. Here’s how these situations impact your No Claim Bonus:

– No Claim Bonus in Case of an Accident: If your vehicle meets with an accident, the No Claim Bonus may be forfeited unless the insurer manages to recover most of the expenses from the at-fault party. In cases involving a third party where fault determination is unclear, expenses may be shared between parties, which can also impact the No Claim Bonus.

– No Claim Bonus in Case of Vehicle Theft: In the event of car theft, the No Claim Bonus is typically jeopardised. Since the insurer cannot recover costs from another party in such scenarios, the No Claim Bonus will likely be forfeited.

Can NCB be Transferred?

The No Claim Bonus can be transferred under certain conditions. The transfer is tied to the policyholder, not the vehicle, ensuring the benefits remain intact when switching vehicles or insurers.

– Transfer Between Vehicles: No Claim Bonus can be transferred from one vehicle to another, provided the policyholder remains the same.

– Transfer Between Insurers: When renewing your car insurance with a new provider, you can also transfer a claim bonus. You must inform the new insurer and provide details such as the exact No Claim Bonus percentage, the name of the previous insurance provider, and the policy number from the last insurance plan.

Understanding the No Claim Bonus is essential for maximising the benefits of your car insurance policy. It rewards you for responsible driving and offers significant savings on premiums.

You can ensure these benefits remain intact by maintaining a claim-free record, renewing your policy on time, and opting for protective covers like No Claim Bonus protection. Additionally, the No Claim Bonus transferability allows policyholders to carry their discounts when switching vehicles or insurers, making it a flexible and valuable feature.

Stay informed about the terms and conditions to fully leverage NCB’s advantages while ensuring your car insurance policy works best for you.