The NCB full form is “No Claim Bonus”. Yes, you read that right. Bonus. This word has the power to single-handedly brighten your mood, doesn’t it? However, this bonus is not available to everyone, you need to meet some conditions to be eligible for it.
Read ahead to know why NCB is so important while renewing your car insurance policy. Note that NCB is associated with a Comprehensive vehicle plan and not with a standalone Third-party Liability plan.
What is No Claim Bonus (NCB) in Car Insurance?
You drive safely for a year and make no claims during the policy period. Your policy period is about to end and it is time for insurance renewal. Your insurer acknowledges the fact that you are a safe driver and wants to reward you for not raising a claim. Thus, the insurer offers you a discount while renewing your policy. This reward is termed as a bike and car insurance No Claim Bonus.
NCB in Car Insurance – How it works?
While everything else around you rises in price, your car insurance gives you a special benefit by actually giving you the choice to reduce your car insurance premium. How does it work, you ask?
Well, it works almost like a rewards system. You start by gaining a 20% NCB discount if you haven’t made any claims for your first policy year. Consequently, you keep gaining an additional 5% from your second consecutive year of making no claims. This can go about a reduction of 50% in your sixth consecutive year. Long story short, the better driver you are, the better you protect your car- the better it works out for you in the long run.
Benefits of NCB in Car Insurance:
Here are the major benefits associated with NCB.
1) Discount:
NCB will help you to fetch a discount on policy renewal. This means you will have to pay less premium compared to what you would have paid if you had raised a claim during the policy period.
2) High Savings:
NCB is incremental if you follow the rules. Therefore, you can get a sizeable discount on policy renewal for years if you do not raise a claim consecutively for five years and renew your policy in time.
3) Transferable:
NCB is associated with the car owner and not the car. Therefore, you can carry forward the NCB if you plan to sell your old (insured) car and buy a new one. NCB also stays with you if you choose to port your policy from one insurer to another.
When Is No Claim Bonus Applicable?
No Claim Bonus is applicable at the time of policy renewal and only on the ‘Own Damage Cover’ component of your car insurance policy. Own Damage, as the name suggests, is the damage done to the insured car. Another component of car insurance is the Third-party Car Insurance cover, buying at least this component is mandatory as per Indian law. It is beneficial when a major accident is caused by the insured car in which third party property is damaged or a person is injured.
Financial protection against damage to the insured car is offered by a Comprehensive car insurance policy. Thus, NCB is applicable only on a Comprehensive policy and not on a Third-party Liability policy.
When is the No Claim Bonus Terminated?
No Claim Bonus (NCB) can get terminated under various circumstances. As a policyholder, there are numerous things which you have to keep in mind to keep your NCB benefits active.
If the insured person claims the policy term, the No Claim Bonus privilege will be withdrawn or terminated by the insurer. For example, for raising a claim to cover damages caused to the car due to an insured peril, there will be no claim bonus termination. However, if the policyholder has the No Claim Bonus Protection Cover, their NCB benefits will remain active. In addition, if the policyholder fails to renew their car insurance within 90 days or three months from the date of expiry of the car insurance policy, then here, too, the NCB will be terminated by the insurer.
Suppose the policyholder allows the policy to lapse, irrespective of the accumulation of claim-free years and eligibility for premium discounts of the car insurance policy. In that case, the car insurer will withdraw the No Claim Bonus. Lastly, if the policyholder fails to transfer the No Claim Bonus to another insurer or a new car insurance policy within a certain period, then the No Claim Bonus will be withdrawn by the car insurer.
Why is NCB So Important in Car Insurance?
NCB is important in car insurance because car owners spend a considerable amount on Comprehensive car insurance during the lifetime of the vehicle. The more the value of the car, the higher the premium. Since NCB helps to reduce the premium, it becomes an important feature for the car owner.
