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No Claim Bonus in Car Insurance: How is NCB Calculated?

A No Claim Bonus or NCB is a reward that the insurance company gives to an insured person for not raising any claim request in the given policy year. A No Claim Bonus is given for all types of insurances; however, we will be talking about NCB in car insurance and how it is calculated. You can say that the No Claim Bonus is a discount that ranges from 20% to 50%, which is given to the insurer while renewing the car insurance policy. The NCB is transferrable that can be transferred if the policyholder buys a new car.

Features of No Claim Bonus

Before going forward with the calculation of the No Claim Bonus, here are some features of NCB that you should know of: –

  • It is Transferrable

    If you have a No Claim Bonus, whether you sell your car or buy a new one, you can easily transfer the NCB in car insurance, earned to date. An NCB certificate will be given to you by the insurer. This certificate is valid for 3 years from the date of issuance. However, you have to keep in mind that the transfer is done only from a four-wheeler to a four-wheeler. A transfer from a four-wheeler to a two-wheeler is not possible. Also, make sure to have a gap of fewer than 90 days between the policy expiry and renewal dates. If the gap exceeds 90 days, the NCB in insurance becomes 0%.

  • NCB Saves on the Premium

    Earning a No Claim Bonus from the insurance company will help you in the premium, as it helps in cutting down costs on the renewal amount of the car insurance policy.

  • It is a Reward

    A No Claim Bonus is given to you when no claims under the expiring policy of the said year are made. You can consider an NCB as a reward from the insurance company for practising safe driving.

How does No Claim Bonus Work?

The No Claim Bonus is applied from the second year of the policy tenure. After no claim requests in the first year, a 20% discount on the premium amount is given to the policyholder. It starts in the second year and remains valid for 5 consecutive years. The following table will guide you on how to check No claim Bonus –

Tenure of Insurance How is NCB discount calculated (in %)
Preceding Year 20%
Preceding 2 Consecutive Year 25%
Preceding 3 Consecutive Year 35%
Preceding 4 Consecutive Year 45%
Preceding 5 Consecutive Year 50%

Cancellation of the No Claim Bonus

Like mentioned before, if there is a gap of more than 90 days between the policy renewal date and expiring date, the NCB in car insurance becomes invalid and comes down to 0%. Another scenario where your No Claim Bonus can get cancelled is if you raise a claim request in the given year.

Terms and Conditions to Keep in Mind

The terms and conditions of the No Claim Bonus for car insurance may differ from insurer to insurer. However, the given terms and conditions are the general ones that you need to keep in mind –

  • For third-party insurance covers, NCB in insurance reward is not applicable.
  • The No Claim Bonus is applicable on ‘own damage’ cover or comprehensive insurance policy.
  • If you are transferring the NCB to your new vehicle, a certificate is issued by the insurer. The reduction on the premium renewal amount for this is at the sole discretion of the insurance company.

Steps to Transfer a No Claim Bonus

Now that you know what No Claim Bonus in car insurance is and how NCB is calculated, here are the steps that you need to follow if you want to transfer the NCB reward –

Step 1: For transferring your NCB from one vehicle to another, you need to have

  • Copy of transfer of ownership (from one car to another)
  • Registration copy of the car from which you are transferring the No Claim Bonus
  • Other KYC documents

Step 2: Once you have these documents ready with you, you need to get the transfer certificate from the insurance company.

Step 3: Lastly, you have to raise a request with the insurance company for the issuance of the existing NCB on the new policy after the transfer.

The No Claim Bonus may vary from one insurance company to another; however, the calculation pretty much remains the same. It comes in handy during policy renewal as you get a discount premium amount. But for earning NCB in car insurance, it is important that you don’t place any claim requests during a policy year, especially if your car has minor damages.

Muthoot Finance is one of the leading non-banking financial institutions in India, offering a range of financial services. From offering motor/car insurance to offering gold loans, personal loans, etc., we take care of everything. Other than this, we also offer domestic and international money transfers, Indo-Nepal money transfers, forex services, and much more. Explore here!

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