Vehicle Insurance : How does No Claim Bonus (NCB) work ?
No claim bonus (NCB) is a discount on vehicle insurance given by insurance company for every claim free year. In Standard vehicle insurance premium is addition of two components third party insurance premium and self damage premium. Additional premium will be charged for add on's like zero depreciation cover,road site assistance etc. No claim bonus is applicable only to self-damage part of premium and not for third party insurance. In standard vehicle insurance policy 80% of premium charged is for self-damage, thus no claim bonus can provide a significant discount on premium. If you buy basic third party insurance then you will not earn any no claim bonus.
How do you earn no claim bonus ?
If you do not make any claim in first year of policy then you get 20% no claim bonus, thus reducing your annual premium for self damage part by 20%. No claim bonus increases every year but is limited to maximum 50%. Refer below listed table for details.
But if you make any claim then your no claim bonus is reset to zero. So avoid making small claims to protect your no claim bonus.
For example your car yearly premium is Rs 10,000, so your self damage premium will work out to be Rs 8000. Let us assume you have completed 5 claim free years, so you will be eligible for 50% no claim bonus i.e Rs 4000. Thus you will be saving approximately Rs 4000 each year.
Is no claim bonus transferable ?
Good part is that no claim bonus can be transferred from one insurance provider to another. If you sell your old car, then you can transfer no claim bonus to your new car. In case your are not planning to buy new vehicle immediately then you can get no claim bonus certificate from your insurance company. No claim bonus Certificate is valid for three years.
If you buy any resale car then you cannot claim the previous owner's no claim bonus, as NCB is linked to policy holder and not to the car.
Always remember to renew your policy on time as your no claim bonus will be reset to zero if you do not renew policy within 90 days of expiry.
No claim bonus protection
You can buy no claim bonus protection to protect your no claim bonus by paying additional premium. It means even if you make a claim your no claim bonus will not be reset to zero. Insurance companies generally provide this protection for maximum two claims in a policy year. Protection is not vaild in case of theft or total loss of vehicle.
But remember if you do not make any claim then benefit of NCB will reduced due to the additional premium paid. If case of any claim your NCB is protected but insurance company might insurance premium on next renewal to care of added risk due to your claim.
Now next time you damage your vehicle avoid making a claim for small repair. If damage is not due to your fault then get the damage cost compensated from other vehicle's insurance provider to protect your protect your NCB.
Drive responsibly to save yourself and insurance premium :)