Know about NCB Calculation during car insurance renewal

A No Claim Bonus (NCB) is a discount offered by the car insurance company to the policyholder on the own-damage premium amount of the car insurance policy at the time of policy renewal. NCB is offered in return for not making a claim during the entire tenure of the car insurance policy. The NCB discount percentage ranges between 20%-50% depending on the number of claim-free years. The maximum NCB policyholders are entitled to is 50% i.e. once you have accumulated 50% NCB this discount will not increase even if no claim is made in future years.

How does NCB Work?

Suppose you do not make any insurance claim for a full insurance term. When you next get your car insurance renewed before expiry, your insurer offers you a discount on the own damage component of your insurance premium. This discount begins with 20% for the first claim-free year and increases cumulatively with each claim-free year until you reach 5 consecutive claim-free years, at which point your NCB gets capped at 50%. Since the own damage component makes up the lion’s share of your insurance premium, this adds up to substantial savings over the long term.

How is NCB calculated?

The NCB discount usually ranges from 20% to 50% on the Own Damages component of your comprehensive car insurance policy. After your first claim-free year, during the time of policy renewal, you are eligible to get 20% discount on the Own Damages premium. If you do not make a claim the following year as well, at the time of subsequent renewal, you can enjoy 25% discount on the Own Damages premium. Similarly, at the end of three, four and five consecutive claim-free years, you will enjoy 35%, 45%, and 50% discount respectively. For example, if you have had 5 consecutive years of claim-free comprehensive coverage, for your next policy, you are eligible to get 50% NCB discount. So, if the car insurance premium is Rs 18,000, out of which Rs 15,000 is the Own Damages premium, then you get a 50% discount on the OD premium, making it Rs 7,500, leaving you with a final premium amount of Rs 10,500.

However, it is important to note that if you make a claim, the bonus discount percentage resets to zero, henceforth.

NCB Slab

Below table will show you the NCB slab on the number of claim-free years:

Claim-free renewals (years)	Discount on Premium
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%

Benefits of NCB in Car Insurance:

Here are the major benefits associated with NCB.

1) Discount:

NCB will help you to fetch a discount on policy renewal. This means you will have to pay less premium compared to what you would have paid if you had raised a claim during the policy period.

2) High Savings:

NCB is incremental if you follow the rules. Therefore, you can get a sizeable discount on policy renewal for years if you do not raise a claim consecutively for five years and renew your policy in time.

3) Transferable:

NCB is associated with the car owner and not the car. Therefore, you can carry forward the NCB if you plan to sell your old (insured) car and buy a new one. NCB also stays with you if you choose to port your policy from one insurer to another.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.