No Claim Bonus – How to Save on Insurance Premiums

Cars are expensive assets and the cost of owning a car goes much beyond its price. Service and maintenance costs coupled with hefty insurance premiums can make your overall car ownership cost quite high. Unlike maintenance and service costs, insurance premiums are one place where you can save a lot by making the right choices. The biggest way of doing that is by utilising the No Claim Bonus (NCB). So if you are wondering how to save on insurance premiums, then NCB can be just the thing you need! Read on to know all about the No Claim Bonus, and how it can help you save big.

What is a No Claim Bonus

A mandatory requirement to drive a car in India, car insurance does more than just protect your car in case of accidents. They also reward you for being a diligent, responsible and sincere owner. This is where a No Claim Bonus or NCB comes in. 

A No Claim Bonus is a unique proposition offered by car insurance providers to reward policyholders for not raising a claim for an entire year. This reward comes in the shape of a discount that is offered when the policyholder renews his/her policy for the next year. The idea behind an NCB is to promote diligent driving and care. The discount offered with an NCB can help you save anywhere between 20 to 50 percent the next time you renew your insurance, making it one of the best ways to save on insurance premiums.

How does NCB work?

When it comes to insurance premiums, there is no better way to save than an NCB. Despite a rise in price for everything else, a No Claim Bonus comes as a way for you to reduce your insurance premium by as much as 50%. Wondering how that works? Here’s how.

Much like a reward system, a No Claim Bonus works by providing a discount to the policyholder as a reward for making no claims in the preceding year. So, when you buy insurance for the first time, you do not have any NCB. You start off with a 20% NCB reward when you do not make a claim in your first policy year. Following this, the reward keeps getting better every claim-free year. This goes on until the NCB reward gets capped at 50% in the fifth consecutive claim-free year. In short, better driving will get you bigger savings!

Applicability of No Claim Bonus

It is crucial to note that the No Claim Bonus offers a discount on the “Own Damage Cover” of car insurance. As the name suggests the Own Damage Cover is the cover for damage that is caused to the insured vehicle in case of an accident. 

The No Claim Bonus is not applicable on the Third Party Cover that deals with the damage caused to a third party/person. And since only a comprehensive car policy offers its own damage cover, thus NCB is not applicable to a third-party policy.

Benefits of No Claim Bonus

Now that you know how a No Claim Bonus works, it is time to look at its key benefits:

• Lower Premium Advantage

The biggest and the most attractive advantage of NCB is that it aids the policyholder to save as much as 50% on the renewal premium, thereby reducing the overall cost of ownership by a substantial amount.

• Inculcates Responsibility

As a reward, a No Claim Bonus is given to only those policyholders that have not raised a claim in the previous year. Irrespective of the percentage, an NCB is a proof of the policyholder being a diligent, responsible and sincere driver. This also helps the policyholder in establishing the overall condition of the car when selling it in the used car market.

• Tied to the Owner, not the Car

The No Claim Bonus is a bonus that rewards the policyholder and is not tied to the car he/she owns. Thus, whenever the policyholder buys a new car or decides to change the existing one, the NCB will remain with the policyholder as long as he is paying premiums for a car insurance policy.

• Easily transferable

Since the NCB is tied to the car owner, it can easily be transferred from one car to another. Additionally, the NCB can also be transferred from one insurance provider to another insurance provider as and when the policyholder decides to change the insurance provider.

When does the NCB terminate?

Since the No Claim Bonus is a reward that gets accumulated upon each claim-free year, it gets terminated as soon as the policyholder raises a claim. In addition to making a claim, there is another scenario where the NCB will get terminated. This is when the policyholder fails to renew the policy within three months from the date of expiry of the insurance policy. Therefore, timely renewal of policy is always a good practice.

Is it possible to protect the No Claim Bonus?

A question that might be bugging you, is whether the No Claim Bonus can be protected despite raising a claim. Well, the answer is yes. With a comprehensive car insurance policy you can choose various add-on coverages to widen the scope of your insurance coverage. One such add-on is the NCB Protection cover which is meant for protecting your accumulated No Claim Bonus despite raising a claim. By choosing the NCB Protection cover, you continue to save a lot, even if you happen to raise a claim. 

The Bottom Line

Insurance premium is a big expenditure towards the overall cost of ownership of any vehicle. Despite a reduction in premium every year, the overall premium amount can still be high depending upon the car you own. However, no matter how much the insurance premium comes out to be, you can reduce it by as much as 50% with a No Claim Bonus. A proposition that rewards you each claim-free year, NCB can be the biggest tool to save on hefty insurance premiums every year. So the next time you renew your policy, make sure to pay attention to the NCB component.

FAQ about No Claim Bonus