NCB or No Claim Bonus is a type of discount or reward offered by the insurance companies to the policyholder when the renewal of their policy on every year without making any claims during the policy term. The term NCB is mostly used in Motor Insurance, a type of general insurance. Before know in detail about No Claim Bonus, we have to know about Motor Insurance.

Motor Insurance

An insurance, which is used to provide a coverage from any financial losses and damages for all types of motor vehicles like motor cycle, car, jeep and commercial vehicles is called motor insurance. It is a type of general insurance but unlike any other insurance, the government has made motor insurance mandatory for the safety of the vehicle owner and others.

In India, as per the motor vehicles Act 1988, it is mandatory to have at least third-party insurance for all vehicles to dive legally. Here we have to see detail about third-party insurance.

Other than third party insurance, to protect the damages made by the owner and damages caused by any other incidents like theft, fire, natural calamities, an optional insurance is used, called comprehensive insurance. In comprehensive insurance, IDV is an important element to know the market value of the vehicle to provide the insurance coverage.

For calculating third party insurance, NCB will not be considering because, the bonus will be provided only for the Insured Declared Value of a vehicle. NCB will be provided to comprehensive insurance and it will help to reduce the premium if the insurance.

Since, for two-wheelers, the NCB will not be more than 20% and that could not make any variations in the insurance premium. Other than two-wheeler NCB plays a major role for the calculation of the vehicle insurance premium.

Full form of NCB

The full form of NCB is ‘No Claim Bonus’, that as the name describes the bonus will be provided only for ‘No Claim’ made by the policyholder in the policy term. The discount will be provided for every year at the time of renewal of the policy without any claims made in that policy term.

Calculation of No Claim Bonus

The calculation of NCB is very easy that it starts from the second-year renewal of the insurance policy. According to the norms in India, at present NCB starts from 20% and ranging up to maximum 50%. To reach 50% NCB takes 6 years of the renewal of insurance policy without making any claims.

The NCB value is given as follows as per the insurance policy renewal of every claim free year.

Claim Free Years No Claim Bonus
After 1 year 20%
After 2 years 25%
After 3 years 35%
After 4 years 45%
After 5 years and above 50%

Benefits of NCB in Vehicle Insurance

The various benefits of No Claim Bonus in the insurance policy are given below,

  • Lower the Premium of Insurance

Generally, everyone expects a discount for saving their money in all purchases. Similarly, people may though that the car insurance premium is high while get an insurance policy from an insurance company to get a coverage for the IDV value of their vehicle. For that NCB is used to get a bonus that lower their vehicle premium to get an insurance without decrease the IDV value.

  • For Getting Rewards

No Claim Bonus is not only used to getting a bonus to lower the insurance premium and also it is proof that the owner of a vehicle has maintain their vehicle in good condition and being a responsible driver for not making any damages. Also, maintaining the NCB leads to increasing the NCB as rewards in the next policy renewal.

  • Praises to Policyholders and not their vehicle

No claim bonus will be offered to get a bonus in the insurance premium for the policyholder and not for their vehicle. Whether, NCB indicates the owner of a vehicle not for that vehicle. The percentage of NCB remains with the policyholder even they change any new car.

  • Easily Transferable

Since, NCB is provided to the policyholder, it can be transferred to their new vehicle and also transferable to any insurance company.

Transferring the NCB to New Vehicle

As said earlier the NCB transfer is very easy and the process is also very simple but it depends on the way people buy a new car, Whether through an agent, offline and online.

If a policyholder buys a new car through online, only the previous insurer and correct NCB will required for the NCB transfer by new insurance company. Other than online, if a policyholder buys a new car, for transferring the NCB will done by only doing the following steps.

  • To transfer the NCB from one insurer to another insurer NCB certificate is needed
  • To get an NCB certificate from the old insurer, some of the document needed that are
  1. Delivery note for the sale of old car
  2. Insurance policy of the old car
  3. Booking form from the receiver for the purchasing the new car.
  4. Buyer Seller Agreement (Forms 29 & 30)
  • After submitting the all documents to the old insurer, they provide NCB certificate that contains the NCB percentage of the policyholder.
  • After submitting the NCB certificate to the new insurer, NCB will be transferred to the new car insurance.

 Some Important Things about NCB

Termination of NCB

No claim bonus will be provided for reducing the insurance premium in the successful renewal of the insurance policy on every year with no claim. If one could make a claim in a policy period, the percentage of NCB will be zero and no bonus will be provided on the renewal of the insurance policy. Otherwise, if one didn’t renew their vehicle insurance policy for more than 90 days, the NCB will be terminated and no bonus will be provided on the next renewal of the insurance.

Does Third-Party Insurance Having NCB?

No claim bonus will be provided in the Insured Declared Value of the vehicle only. Comprehensive policy only contains the IDV for the calculation of an insurance premium to provide the insurance coverage against any damages. But, in third-party insurance, IDV is not considered to calculate the premium because that the insurance is designed to provide only for the insurance coverage of third-party damage made by the owner of the vehicle.

Insurance Companies in India
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