Thursday , December 2 2021

How NCB is Calculated in Motor Insurance?

Who doesn’t like discounts or having to pay less than expected without compromising on the product or the services offered? In a motor insurance policy, NCB or No Claim Bonus does exactly that. It brings down the cost of policy premium without affecting coverage whatsoever. And what do you do to get this? Just drive or ride your car or bike safely and refrain from making any claims during the policy period. Yes, most insurers offer NCB for not raising a claim during the previous policy tenure. NCB is an additionaldiscount that can be availed of over any other discount such as that for online policy purchase, andinstallingsafety devices. NCB is applicable on own damage (OD) and comprehensive motor insurance policies.

If you are wondering how NCB is calculated, then here’s the answer. NCB begins at a rate of 20% of the premium amountafter you complete one claim-free year.For every claim-free year, you earn a No Claim Bonus in the following year. Generally, the NCB for the first claim-free year is 20%, and it may increase up to 50% by the fifth claim-free year. When you claim to fix scratches or small dents, you could want to save the expenses to make your car look shiny and flawless.But what you overlook is that the claim would reset the NCB cycle and put you at a loss.

Take a look at the table belowto understand how NCB is calculated.

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 50%

The No Claim Bonusplays a significant role in the premium amount, and it is important to know how it affects a long-term insurance policy.At the time of motor insurance policy renewal, you may realise that the cost of the policy has increased and that you do not have the NCB advantage because you made a small claim during the previous policy period. Even a single claim can bring your NCB to zero. The increase in the premium amount could be much higher than the cost of repairing a small dent or removal of a minor scratch. So, file a claim only in case of significant repairs, third-party incidents or theft.

 Since different insurance companies have different NCB structures, it totally depends on your insurer to allow you to retain NCB despite making a claim. Also, you risk losing your NCB if you do not renew your vehicle insurance on time and it expires.

The two major benefits of NCB are—it reduces the premium amount payable and can be transferred when you buy a new policy.You can check online the total amount of NCBs accumulated by you or get in touch with your insurer to know the details. During the renewal of your car policy, you can check whether you have received a discount on the renewal premium.

You can transfer the NCBs of your existing car policy to your new car insurance when you buy a second car. Transferring the NCBs to your new car is a simple process. Theaccumulated NCBs on your existing or old car insurance aretransferred to the new policy. It helps in getting a discounted premium on the new policy.There can be two situations in which you can transfer the no claim bonus:

1) Selling the old carand purchasing a new one, or

2) Retaining the old car and buying another car

  • Selling the old car for purchasing a new one

If you have earned NCB on your old car’s insurance policy, but decide to sell your carto purchase anew one, you can use the accumulated NCB during policy purchase for the new car. Remember to obtain the NCB certificate from your existing insurance provider if youwant a discount on the new offline or online car insurance purchase. You will get adiscountirrespective of any mode of purchase.

  • Retaining the old car and buying a new car

You can claim NCB benefits for purchasing a motor insurance policy for your new car even if you decide to

retain the existing car. However, you need to transfer the ownership of the existing vehicle

to a family member to avail of the NCB-aided discount on the new policy premium.When making the NCB transfer for discounts on your new car insurance premium, note that the

discount is available only for the own-damage (OD) policy premium. Accordingly, the premiumvalue will be adjusted, and you will get a discount based on the insured declared value or IDV ofthe new car.

The NCB certificate 

For transferring the NCBs from the old insurance to the new one, you have to get an NCBcertificate from your insurer. This is a supporting document or proof of the transfer.

  • If you are buying a new policy from your existing insurer, you can apply for an NCB


  • If you buy a new car policy from a different or new insurance company, you haveto get an NCB transfer letter and the NCB certificate for a discount on the new policy.
  • If you sell your old car to a third party, you should retain the sale invoice andsale deed, as the documents may be required during NCB transfer.

So, you can make the most of your car insurance by raising claims only when it is absolutely necessary. For every claim-free year, you are saving money in the form of a reduced premium and gaining NCB on the next policy. This would further benefit you during the purchase of new car insurance in future. Retaining the NCBs acts as an incentive to drive or ride carefully and avoid damages to your car or bike, thus reducing the risk of accidents.

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