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All you need to know about the No Claim Bonus in Car Insurance

No claim bonus or NCB is the most common word you hear when you take car insurance. A Valid Third party Insurance is mandatory for every car to ply on the public roads. The first party car insurance can be taken as a standalone if there is an existing third party car insurance policy. It is important to understand the meaning and everything about the no claim bonus at the time of taking the car insurance policy copy. It is the right of the customer to know the NCB being offered to him and the terms and conditions that come with the No claim bonus.

NCB in car insurance:

No Claim Bonus (NCB) in car insurance is the discount offered by the insurance company on the own damage section of the insurance policy for the customers who don’t claim in the previous years. The no claim bonus is a reward given to the customers who refrain themselves from small claims or customers with good driving behaviour.

The No Claim Bonus in car insurance increases for each claim free year and is offered to the owner/driver of the car for their good driving behaviour.

NCB Calculator:

No Claim Bonus (NCB) Calculator can be obtained from the online portal www.policybachat.com by entering your car details and the previous policy copy details. PolicyBachat has a dedicated team of agents to assist you with your car insurance requirements and helps you to know your eligible NCB as per the previous year policy copy.

Here is the No claim bonus calculator for your clear understanding:

Claim Free years NCB %
New car 0 %
First claim free renewal 20%
Second Claim free renewal 25 %
Third claim free renewal 35 %
Fourth claim free renewal 45 %
Fifth claim free renewal 50 %

The No Claim Bonus can be extended beyond 50 % in some cases where the previous year policy copy has 55% No claim bonus mentioned and also for old vehicles which have more than 50 % NCB.

How does No Claim Bonus work?

No claim bonus as mentioned earlier is a reward in the form of discount calculated on the Own Damage section of your car insurance policy. The Own damage section premium is first discounted according to the make, model of the car and then the discounted premium is again discounted for the No Claim Bonus thus arriving at the final premium.

Own Damage Premium   Rs. 20,000
Company Discount (-70%) Rs. 14,000
Premium after company discount Rs. 6,000
No Claim Bonus (Fifth claim free year) (-50%) Rs. 3,000
Premium to be paid after NCB discount   Rs. 3,000

No claim bonus is calculated only on the Own Damage section of your car insurance policy and not on the Third party section as the TP premium is decided by the IRDA and cannot be further discounted. If you opt only for Third party insurance then the NCB discount will not be applicable on your car insurance policy. The No Claim Bonus is applicable only if you take the Comprehensive or the Package policy. NCB would not applicable on the add-on section of the car insurance premium.

In case of a claim in any year, the no claim bonus for the next year would become “Zero” and the cycle repeats.

Importance of correct NCB:

No Claim Bonus is carried forward from the previous year policy for every claim free year. When your purchase your car insurance policy from any insurance companies it is your responsibility to verify all the details in the policy copy. If you find that the NCB is less or greater than what you are entitled to then the below scenarios may happen:

  • If you have wrongly claimed NCB even though there is a claim in the previous year/ received higher NCB slab due to an error, then the insurance company will send you a notice of NCB recovery. You can either pay the difference amount or choose to ignore it, but at the time of claim some companies may reject the claim due to false NCB claim while some companies may settle the claim by deducting the NCB amount.
  • If you have received a lower NCB slab than what you are entitled to then it is your responsibility to approach the insurance company for the rectification by submitting your previous policy copy as proof of your NCB.

No claim bonus is to be captured correctly in the car insurance policy copy without which the customer will end up paying more premium than what he is supposed to and on the other hand if the NCB is captured wrongly then the customer has to face issues at the time of claim due to false NCB declaration.

NCB for Small claims:

The basic need for insurance is to protect yourself from catastrophic claims which may result from accidents or theft of your car. If the claims are small you can bear the amount of repair from your pocket, but if the claims are large it would be difficult for you to bear the repair expenses. So, the need for insurance should arise in case of large claims and not in case of small claims.

Small claims in case of car insurance are those where the value of the repair doesn’t exceed 1 % or 2% of the Insured Declared Value (IDV) of the car. For example if the IDV of the car is Rs.5 Lacs any claim with value up to Rs.5000 is considered as a small or petty claim. Since the Compulsory deductible in this claim would be Rs.1000 and the net claim amount received by the customer would be Rs.4000 only. These small claims would cost you your No Claim Bonus dearly and increase your renewal premium drastically.

Normally the average NCB for any vehicle would be 35% if there are no claims for the past few years. This NCB discount amount would be more than 1-2% of your IDV value and hence it is not advisable to go for small claims. The small claims should be handled by yourself and should save your NCB for much larger claims. The concept of deductible in insurance is to discourage the insured from claiming petty damages thereby increasing the administrative and other expenses of the insurance company and at the same time losing the hard earned NCB of the customer.

How to protect your NCB?

There might be instances where the claim was unavoidable and the customer might end up losing his hard earned 50% NCB due to a single claim. There are many customers who do not claim even after using the vehicle for more than 10 years. This shows their good driving habits where no large claims have been reported. But as discussed above there might be an instance where the insured was forced to report a claim due to an accident despite of the good driving behaviour of the insured.

By paying an extra premium you can opt for “No Claim Bonus (NCB) Protector” which protects your NCB even after you make a claim under your car insurance policy. No Claim Bonus is the add-on offered by few of the top car insurance companies such as ACKO, BAJAJ ALLIANZ, TATA AIG, ROYAL SUNDARAM etc on payment of extra premium. This add-on is available under the Own damage section of your car insurance policy where the premium for this shown separately.

The limit of claims under the No Claim Bonus protector add-on is up to 2 claims in a policy period. If you exceed the two claims and go for the third claim under your car insurance policy in a policy year, then your NCB protection cover would not apply and the NCB would become Zero at the time of next renewal.

NCB Transfer:

No Claim Bonus is a discount offered by the insurance company on the own damage section of the car insurance policy to reward the insured for his good driving behaviour. It is to be noted that the NCB is given to the owner/driver of the car and not the vehicle. NCB can be transferred from one vehicle to the other vehicle belonging to the same insured. If the vehicle is sold, then the NCB is not carried forward to the new customer as the NCB belong to the customer and not the vehicle.

NCB can be transferred from one insurance company to the other at the time of renewal without submitting any extra documents.

There may be instances where the customer is having a Car which he wants to sell and purchase a new car, in this scenario the NCB of the old car can be transferred to the new car thereby reducing the premium to be paid in the first year of insurance. Normally the first year premium charged by the car showrooms would be high compared to the premiums of other agents. By transferring the NCB from your old car to your new car, a big chunk of premium to be paid could be saved.

The following are the documents to be submitted to the insurance company for claiming the NCB on the new car:

  • Transfer application to the insurance company stating the transfer of NCB from old car to new car
  • Xerox of Car insurance policy copy
  • Agreement between the Buyer & Seller (Forms 29 & 30) duly signed and certified by the competent authority.
  • Copy of Ownership transfer certificate (in case of old car). A certificate stating that the ownership is transferred from seller to buyer.
  • A copy of Delivery Note to the buyer.
  • Copy of payment receipt of new car.
  • NCB certificate in the form of policy copy.

NCB in case of Total Loss:

No Claim Bonus becomes Zero if there is a claim previous year, but what happens if the vehicle is stolen (theft claim) or there is a total loss claim in the previous year? Total loss is the situation where the vehicle is stolen and is not recovered and the claim is settled under total loss basis. Constructive total loss scenario is where the vehicle is damaged badly such that the repair costs exceed 75% of the IDV of the car.

In both the total loss and Constructive total loss cases the NCB will become Zero and there would be no chance to transfer the previous car NCB to the new car. Since the insurance company will not have an option to recover the damages from the third party in case of total loss or constructive total loss, the NCB cannot be transferred from the old car to the new car.

NCB for Private Car, Commercial Vehicles and Two wheeler:

The concept of NCB is same for all the class of vehicles be it Private car, Commercial vehicle or a two wheeler. No claim bonus is a type of discount offered by the insurance companies on the own damage premium for Commercial vehicles and two wheelers as well. The NCB protector might not be available for the Commercial vehicles from most of the insurance companies as insurance companies prefer to offer this add-on only to the cars.

Any car used for the purpose of pleasure is registered as Private car whereas if it is used to transport customers from one place to another, it should be registered as a Commercial vehicle. The NCB in commercial vehicle is also the same as that of the private car where if a claim is made in the previous year, the NCB becomes Zero at the time of renewal.

Validity of NCB:

No Claim Bonus is valid for 90 days from the date of expiry of your car insurance policy. If you renew your car insurance within 90 days from the date of your car insurance policy expiry, NCB in the previous policy copy can be used at the time of renewal.

If the renewal is done after 90 days from the date of expiry of previous policy copy, NCB will not be valid as it will expire and the net NCB will become Zero. If you forget to renew your insurance, then it is advisable to renew it within 90 days to carry forward your NCB from the previous year thereby reducing your premium to be paid.

For NCB related queries visit www.policybachat.com and get the NCB related assistance from a team of agents dedicated to assist you.

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