Understanding NCB (No Claim Bonus) in Car Insurance
When purchasing car insurance, understanding the concept of the No Claim Bonus (NCB) is essential for making an informed decision. Many drivers are attracted to the idea of NCB because it sounds cheerful and rewarding—and for a good reason. It represents a significant opportunity for savings, providing car owners with financial benefits when they avoid making claims during a policy period.
In this blog, we will explore what NCB is, how it works, its importance in car insurance, and why every car owner should consider it when renewing their car insurance online.
What is No Claim Bonus (NCB) in Car Insurance?
NCB, or No Claim Bonus, is a discount offered by insurance providers to policyholders for not making any claims during the car insurance policy term. Essentially, it is a reward for being a responsible driver and maintaining the condition of the vehicle. This bonus helps reduce the premium payable during the next policy renewal, incentivizing car owners to drive safely and avoid unnecessary claims.
How Does NCB Work in Car Insurance?
NCB is calculated on the 'Own Damage' component of the car insurance premium, the portion of the policy covering damages to your vehicle.
NCB Percentage Table:
However, if a claim is made during any policy year, the NCB is reset to zero, and the discount will need to be earned again from the next claim-free year. For example, if you do not make a claim during the first year of your policy, you will receive a 20% discount on the premium for the second year. This discount increases progressively up to 50% if no claims are made over five consecutive years.
Benefits of NCB in Car Insurance
Here are the key advantages of a No Claim Bonus (NCB):
Discount on Policy Renewal: One of the primary benefits of NCB is the discount on policy renewal. This means that you pay a reduced premium amount compared to what you would pay if you had raised a claim during the policy period. Over time, these savings can be substantial, especially for expensive cars where the insurance premium is higher.
High Savings: The savings from NCB can be significant if you continue to renew your policy without making any claims. By following safe driving practices and avoiding claims for minor damages, you can earn a sizeable discount on your car insurance premium year after year.
Transferable Benefit: NCB is associated with the car owner, not the vehicle. This means that you can transfer the accumulated NCB to a new car if you sell your old one. Moreover, if you decide to switch insurers, you can carry forward your NCB, ensuring that your efforts to maintain a claim-free record are rewarded regardless of your insurance provider.
When is No Claim Bonus Applicable?
NCB is applicable at the time of policy renewal. It applies only to the ‘Own Damage Cover’ portion of your comprehensive car insurance and to the standalone own damage cover, which compensates for damages to the insured car.
When is the No Claim Bonus Terminated?
An NCB may be terminated under several conditions. As a policyholder, you must be aware of these factors to keep your NCB benefits active.
If a claim is made during the policy term, the insurer will withdraw or terminate the No Claim Bonus. For instance, filing a claim to cover damages caused to a car by an insured peril will result in NCB termination. However, if the policyholder has an NCB cover, the NCB benefits will remain intact. Additionally, failing to renew car insurance within 90 days (three months) from the policy expiry date will also lead to the termination of the NCB by the insurer.
If the policyholder allows the policy to lapse, regardless of the number of claim-free years or eligibility for premium discounts, the insurer will cancel the NCB. Lastly, if the policyholder does not transfer the NCB to another insurer or a new car insurance policy within a specified period, the insurer will withdraw the NCB.
Can a No Claim Bonus Be Protected?
Policyholders can protect their accumulated NCB in car insurance by purchasing an NCB Protector add-on, which requires an additional premium. This rider ensures that the NCB benefits remain intact even if a claim is made.
The NCB Protector add-on is popular among customers because it provides lower premiums over a longer period based on the accumulated NCB. From the second year onward, policyholders are eligible for reduced premiums, allowing them to save up to 50% on insurance costs.
NCB in Case of Accident or Theft
Understanding the concept of NCB in car insurance is essential to comprehend its application:
NCB in Case of Accidents: In the event of an accident, some or all of the NCB may be lost unless the insurer can recover the majority of the costs from the at-fault party. If the driver's negligence is unproven, the expenses may be shared, impacting the NCB.
NCB in Case of Theft: If the car is stolen, the NCB may also be at risk, as the insurer cannot recover the costs from another party.
How to Transfer NCB When Buying a New Car?
The NCB can be easily transferred from your old car to a new one because it is associated with the owner, not the vehicle. Follow these steps:
Submit an NCB Transfer Request: Contact HDFC ERGO and request to transfer your old car's NCB.
Obtain Your NCB Certificate: HDFC ERGO will verify your details and issue the NCB certificate.
Apply for a New Insurance Policy: When purchasing a policy for the new car, confirm your NCB details. After verification, the NCB will be transferred.
Terms and Conditions for NCB Transfer
To transfer NCB in insurance, keep the following points in mind:
When buying a new car and selling an old one, ensure you transfer the NCB to the new vehicle. A certificate will be issued by the insurer, subject to their discretion.
NCB cannot be purchased with third-party insurance; it is only available with the own damage or comprehensive policies.
To check your applicable NCB, refer to the NCB slabs provided on the insurer's website during the online car insurance renewal process. If switching insurers, mention the NCB from your previous policy. NCB calculation details are also included in the policy document.
Documents Required for Smooth Transfer
A valid copy of your car insurance policy
A copy of the vehicle's registration certificate (RC)
A valid photo ID
How to Retain NCB During Motor Insurance Policy Renewal?
The NCB can be transferred from an existing policy to a new one, regardless of whether you renew with the same insurer or a different one. Renew your car insurance online before it expires to retain the NCB benefit. Make sure to renew your car insurance within 90 days of the previous policy’s expiry to retain the NCB.
Steps to Renew a Motor Insurance Policy Before Expiry:
Visit the insurer's website and select the car insurance option.
Enter your vehicle registration number and choose the "Renew" option.
Fill in your vehicle details and add any add-ons like zero depreciation or NCB protection cover.
Get an instant car insurance premium quote.
Proceed with the payment online.
Once renewed, the car insurance policy will be emailed to your authorised email ID.
Conclusion
Understanding and effectively managing your no-claim bonus can lead to substantial savings on car insurance premiums. By maintaining a claim-free record, protecting your NCB, and transferring it correctly, you can ensure continued financial benefits and lower insurance costs.
Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.
Disclaimer: This article is published in association with HDFC Ergo and not created by TNM Editorial.