Importance of No Claim Bonus for Car Insurance

Buying a car insurance policy provides the much-needed financial security if an unfortunate event occurs. In case of an untoward incident, your insurance provider will compensate you for the financial losses. However, in case you do not make any claims during the term of your policy, you may avail of a discount during your next policy renewal.

Understanding No Claim Bonus

Many fail to understand what is No Claim Bonus? (NCB). In simple words, NCB is a discount offered to the policyholder for not making any claims in the previous policy year. This discount acts as a reward for safe driving. NCB is calculated on own damage premium. This benefit is applicable only on comprehensive insurance policies and not on Third Party insurance policies.

NCB is awarded for the subsequent year during policy renewal. The validity of NCB is generally 90 days from the date of renewal. In case the policyholder fails to renew the insurance policy within this time frame, the NCB turns to nil. In case you sell your vehicle without purchasing a new one, you are eligible to receive a NCB reserving letter, which is valid for three years.

Process of calculating NCB

NCB starts at 20% discount during the second year, i.e. policy renewal year. This may go up to a maximum of 50% during the sixth year. During the second year, you may be awarded 20% discount, 25% during the third year, 35% during the fourth year, 45% during the fifth year, and 50% during the sixth year. NCB may also be extended till 55% to 65%.

Validity of NCB

As stated earlier, NCB is valid for a maximum of 90 days from the date of renewal. This indicates that in case you are off the road for that period, you will be left with car insurance with No Claim Bonus. In such cases, you may have to apply for a new policy and accumulate NCB on the basis of your new insurance plan.

Process for claiming NCB

The process of availing of the benefit of NCB is simple. All you have to do is state that you have not made any claims in the previous policy year. Your insurance provider will then provide you proof of NCB, either through a letter, an email or a PDF document. If you wish to switch your insurance provider, your current insurer will provide proof of NCB through a certificate. The NCB verification may then be done through the Internet.

NCB transfer process

NCB may be transferred from one insurance provider to another. It may also be transferred to a new vehicle purchased by the same person. NCB transfer may be done only from private to private vehicles. The transfer is not eligible if you are switching from a four-wheeler to a two-wheeler.

Following is a step-by-step guide to making a No Claim Bonus transfer.

1. 1. If you wish to transfer NCB from your sold vehicle to a new vehicle, you may furnish a photocopy of the ownership transfer certificate as well as old registration certificate to the new insurance provider.
2. 2. You may then take the NCB certificate from the insurance provider once you send a copy of the delivery note.
3. 3. You may submit a written request asking a NCB transfer from the existing policy to the new one.
4. 4. The obtained NCB certificate may then be transferred to the new insurance policy anytime within the stipulated time frame.

NCB is an efficient method to lower premiums on your next policy renewal. It is, therefore, important to know the No Claim Bonus meaning, method of determining NCB amount, validity of NCB, and process to transfer NCB. By doing so, you may enjoy the rewards of safe and reliable driving.

This blogs has been written by
Mr. Mukesh Kumar recommends "getting your two wheeler insured from HDFC ERGO, a brand serving more than 1 crore+ customers. With overnight repair services and more than 7,600+ network garages, you can be assured of help in event of any damage to your vehicle".