All About No Claim Bonus of Car Insurance

1. Mr. Satyam, a 28 year old software developer in an MNC company, bought his dream car after shifting to a new company. He was very much happy with his decision as it was one of the biggest achievements of his life. He was very much concerned about the safety and security of his car and that’s why he made a wise decision of buying a car insurance policy. Mr. Satyam understood the benefits of a car insurance policy and bought the best policy after proper research. But when Mr. Sumit, a friend of Mr. Satyam, told him about how an NCB can do wonders to his car insurance policy, he was very surprised as he wasn’t aware about the fact. So let’s see what Mr. Satyam asked from Mr. Sumit and what answers he gave about NCB Mr. Satyam:- What is an NCB? Mr. Sumit:- No claim Bonus is a reward for safe driving, which makes the policyholder eligible for a discount or bonus on the premium if no claim is made for a particular period of time. The benefits of NCB are given at the time of renewal of the policy. In most of the cases (expect transferred NCB), when you buy a new car insurance policy, you are not eligible for any type of NCB because you have no any claim free record. Mr. Satyam :-How is premium related to No Claim Bonus? Mr. Sumit :-The No Claim Bonus is given in the form of discount or bonus on the premium and it is same or every car insurance service provider. The bonus starts from 20% at the second year/renewal of the car insurance policy and can go up to a maximum of 50% in the sixth year.

2. The NCB discount works as follow: Period of Insurance After one claim free year After two consecutive claim free years After three consecutive claim free years After four consecutive claim free years After five consecutive claim free years % of NCB on own damage premium 20% 25% 35% 45% 50% So the discount on No Claim Bonus depends on the number of claim free years. So the more claim free years, the more will be your gain from NCB. Mr.Satyam:- Is NCB applicable on Third Party cover also? Mr.Sumit:-No, the NCB is applicable on your own damage premium component and not the third party liability premium which is 15-20% of the total premium. Let us understand this through an example:- You bought a car insurance policy 5 years ago and have never made a claim which means you are eligible for a No Claim Bonus of 50%. Now if your total premium is Rs.20,000, out of which Rs.18,000 is for your own damage component, then the 50% discount will be given on Rs.18,000 which will be Rs.9000 and then you will have to pay Rs.11,000 instead of Rs.20,000. Mr. Satyam:-How can you transfer your NCB? Mr. Sumit:- You can easily transfer your NCB by following simple procedure when you sell your old car and buy a new one or when you switch your insurer. First of all you will have to submit the form 29,30 along with a letter requesting for transfer of your NCB of old car to new car. After that the insurer will issue an NCB certificate, which is valid for three years. You will have to submit this NCB certificate to the new insurer and your NCB will be transferred. In case of online policy, you don’t need to submit the certificate as the NCB is transferred on your declaration. But you should know that your new insurer can cross verify your NCB with your previous insurer. So it is always good to declare the correct information. Mr. Satyam:-When do you lose your NCB? Mr. Sumit:- Your NCB can be cancelled in two cases. Firstly, if you have made any claim during the policy term, then the insurer can cancel your NCB. That’s why it is advisable to avoid making any claim for minor damages in your car as saving on these small expenses can snatch your bigger profits. The second case in which your insurer can cancel your NCB is when there is a break of more than 90 days between the insurance periods which is counted from the date of expiry of your old insurance. So you should renew your car insurance policy before90 days from the date of expiry to enjoy the NCB. Mr. Satyam:- Is there a No Claim Bonus add on?

3. Mr. Sumit:- In a regular car insurance policy without any add on, the NCB is only given if you have made no claims during a particular period of time. But there is an availability of NCB retention add on which allows you to protect your NCB even after making claims up to a certain limit. After this conversation with Mr. Sumit, Mr. Satyam was very much satisfied and was able to understand the various aspects of NCB for a car insurance policy. But Mr. Satyam didn’t want to miss any point regarding NCB so he asked Mr. Sumit that, is there anything else which he needs to keep in mind regarding NCB, then Mr. Sumit told him the following points:- Always be careful while transferring your NCB and make sure you provide correct NCB at the time of transfer so that you have to face no any hassle when your insurer cross verifies your NCB. After reaching the 50% bonus through NCB, you will not be rewarded with anything even if you don’t make any claim. No Claim Bonus is applicable on per person, not per car In the end Mr. Sumit told Mr. Satyam that that accumulating NCB by not making minor claims can reduce your premium amount and minimize the financial burden. It is always good to keep a check on your accumulated NCB and make claims only if required.