NCB in Car Insurance: how it helps you

NCB, or No Claim Bonus, is a reward from your insurer for being a careful driver. It is a financial incentive provided to you when you do not file any insurance claim on your car insurance during the policy period.

For instance, every year, there is no health claim in your health insurance, and there is an increase in the sum insured amount. Similarly in car insurance, instead of increasing the coverage amount, NCB helps you reduce your car premium every year you renew it claim-free.

How does a No Claim Bonus work?

Assume your annual car insurance premium is ₹5,000. If you drive safely and do not make any insurance claim during the policy duration, your insurer will provide a discount on your next premium. This discount generally starts at 20% and increases every year that you do not make an insurance claim and can go up to a maximum of around 50% of the premium amount after consecutive 5-year claim-free periods. The year-wise discount is detailed in the table below for an annual package policy:

Number of years	NCB percentage
1 claim-free year	20%
2 consecutive claim-free years	25%
3 consecutive claim-free years	35%
4 consecutive claim-free years	45%
5 consecutive claim-free years	50%

If you pass 5 years and do not file any claim, you can retain the 50% premium discount on the premium.

Let us understand this via an example. Suppose your premium is ₹5,000. If your insurer gives you a 20% NCB discount at the end of year 1, your premium for year 2 would be ₹4,000 instead of ₹5,000. In short, you get an insurance premium discount of ₹1,000 for driving your vehicle safely.

One good way to keep your NCB benefit safe is to pay for minor expenses from your pocket instead of claiming them via the insurer. This will allow you to continue your NCB benefit for a longer period. It is important to know that NCB does not apply to the third-party insurance coverage mandatory in India.

Also, NCB is transferrable if you buy a new car and take a new insurance policy for it. Similarly, NCB can be transferred if you switch insurance providers.

NCB is tied to the person, not the insured vehicle. If you decide to sell your vehicle, the NCB will remain intact with you and will not be passed on to the new owner.

Several insurance providers provide NCB protection add on cover with your car insurance policy. This allows you to file an insurance claim during the policy period while still retaining the benefits of NCB.

Take an example of car insurance of 4 years and you have an NCB of 45% wherein you have not made any insurance claim in it.. However, in the next year, there is a claim due to damage to your vehicle. In that case, the NCB percentage will become NIL and you will have to pay the full insurance amount at the time of renewal of policy. If you have NCB Protector add on, the insurer will keep your NCB to the same level i.e. 45%

So, drive safely next time you’re on the road and see how it impacts your car insurance savings. Explore Royal Sundaram's insurance products while safe driving boosts your car insurance savings!