Car insurance works on the principle of indemnity, that means you will be compensated for your loss under the terms and conditions of your car insurance policy. But, if you do not suffer a loss, you would not raise a claim. When you do not raise a claim, you are given a discount on the cost of your car insurance policy. In this article, we will discuss more on this discount.
What is NCB?
NCB stands for No Claim Bonus. A policyholder is entitled to NCB online if he/she does not raise a claim against a car insurance policy. NCB is regarded as the highest discount available on car insurance. Thus, NCB is a sought-after discount when one calculates car insurance premium.
Consider you and your brother renewed car insurance policies on the same day. Since you both had bought your cars together, the NCB calculations are more or less similar. If you meet with a minor accident and the headlights get damaged. As the cost of repairing this damage is more, you decide to raise a claim. In this situation, your NCB will reset to zero, but your brother’s NCB does not change as he did not raise a claim.
Upon the next renewal, you will see a higher car insurance quote for your policy as compared to your brother. The difference is only because you failed to drive safe and got the car damaged. If this damage was within your budget, it would have been wise to pay for the repairs from your pocket. Since the entire cycle was set to zero, you saw a higher car insurance quote. Thus, NCB and safe driving go hand in hand.
How is NCB Calculated?
The Insurance Regulatory and Development Authority of India (IRDAI) has set certain rules to be followed by insurance companies with respect to No Claim Bonus on car insurance prices. The following table will give you an idea of how NCB in car insurance is calculated.
| Claim-free renewals | Discount on car insurance quote |
| On first claim-free renewal | 20% |
| On second claim-free renewal | 25% |
| On third claim-free renewal | 35% |
| On fourth claim-free renewal | 45% |
| On fifth claim-free renewal | 50% |
As mentioned in the example given above, if you raise a claim against your car insurance policy your NCB will reset to zero. Another situation in which it can drop to zero and increase the car insurance prices is when you fail to renew your policy for more than 90 days. This duration can differ as per the terms and conditions of your insurer. Thus, it is important to keep renewing your car insurance policy in time in order to avail the No Claim Bonus.
When can I retain my No Claim Bonus?
You can retain your NCB in two situations – first is when you switch your insurance company, and the second is when you buy another car. You need to get a transfer certificate from your insurance company and submit it at the RTO while getting the new car registered.
What is NCB Protector?
This is an Add-on that you can buy with your comprehensive car insurance policy. As the name suggests, the NCB Protector add-on allows you to raise a claim against your car insurance policy and still keep the NCB intact. This will allow you to avail the NCB discount when you renew your car insurance policy even after raising a claim.
The Bottom Line
The importance of driving safe cannot be emphasized upon more. Not only does it keep you safe while on the road, but also helps you earn a discount on each car insurance renewal. Do not forget to check the percentage of NCB while calculating car insurance premium.