How does NCB work for Car Insurance?

A valid car insurance policy protects your car against damages that may arise when you drive your car out on the roads. In India, all car owners must ensure they have a basic car insurance policy for their cars. There are various features that enable you to reap the full benefits of car insurance. One such feature is the No Claim Bonus or NCB add-on. Read on to know more about this NCB and how it can help you!

What is No Claim Bonus (NCB) in car insurance? 

No Claim Bonus is a type of reward that is offered by car insurance providers to the policyholders for every policy year they go without filing a claim. If you have not filed a claim in the policy year, you are eligible to get a discount on the premium amount for the next year. This encourages you to avoid filing claims for amounts that are small and can be paid from your pocket.

How does NCB work? 

NCB is really helpful with the amount of premium rising year after year. This is a reward-based system where you start with a 20% discount available to you on next year’s premium if you don’t file any claim in the current year. Every year, this percentage increases by 5% for every non-claim year. The maximum percentage of discount available to you is 50% after the sixth consecutive non-claim year.

For example- If the premium amount for the next year is Rs 20,000 and you haven’t filed any claim in the current year, then you’re eligible for an NCB of 20%, that is, you have to pay Rs 16,000 as the premium amount (Rs 20,000-20%). If you don’t file a claim in the subsequent year, the NCB percentage goes up to 25% which will be applicable as a discount on the premium.

Benefits of No Claim Bonus

1. Discounts-

NCB feature gives you discounts on the premium amount for the next year. This reduces the expenses and makes the policy affordable.

2. Easily Transferable-

Since NCB is associated with the car owner and not the car, it can be transferred from one car to the other. This is useful in cases where you have sold or are planning to sell your car and buy a new one. You can also transfer the NCB if you switch one insurance company to the other.

3. Motivation to drive safe and stay claim-free

Since you are aiming for a no-claim year, you tend to drive your car more safely and be alert during this whole journey. This reduces the risk of getting into an accident which saves a trip to the mechanic or other hassles.

When is NCB no longer valid?

There are two situations where NCB no longer stays valid- First, when you file a claim in the current policy year. Second, when you fail to renew your policy within 90 days from the date it lapses. If you fail to renew the policy within the stipulated time then the accumulated NCB becomes invalid.

Features like the No Claim Bonus enhance your insurance policy so that you get your money’s worth. It acts as an incentive to encourage safe driving and discourages useless claims.