What is a No Claim Bonus(NCB) and why does it matter?

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Key Takeaways

  • A No-Claim Bonus (NCB) is essentially a reward you get for not making an insurance claim in a year.

  • If you don’t make an insurance claim in a year, it is good news for insurance companies. So, in order to reward you, NCB comes into play. The insurance companies basically reward you with a discount on premiums.

  • You might think, what accumulating NCB if it is not transferable to future purchases you might make? The answer is you can transfer your NCB!

Introduction

 

People talk a lot about insurance, especially to the younger generation. Once you get insurance, you might wonder what is the point of paying your premium regularly if you never suffer a loss, and never make a claim? There are actually several benefits, one of them being a no-claim bonus.

 

In this blog post, we will decode for you what a no-claim bonus means and why it matters. A No-Claim Bonus can be there on multiple types of insurance policies, but this article focuses on the most common occurrence, motor insurance.

 

What is a no-claim bonus?

 

A No-Claim Bonus (NCB) is essentially a discount you get for not making a claim in a year.

Imagine you’ve bought an insurance policy for which you pay a premium regularly.

 

Now, when you don’t make a claim, the policy doesn’t pay out any benefit. This can cause you to feel like insurance is a steep expense.

 

In such cases, the no-claim bonus comes into play. If you do not make an insurance claim in a year and have paid all your premiums, insurance companies can offer you a discount on your premium when you renew your policy.

 

Think of it as a reward given to you by insurance companies.

 

You are eligible for an NCB when you renew your policy IF you haven’t made a claim against your existing policy. Every time you renew your insurance policy without having made a claim, your NCB increases, up to a maximum of 50% in 5 years. In other words, the safer you drive (in the case of car insurance, for example), the lesser premium you will have to pay.

 

Often, your NCB is used by the insurer to tell what kind of a driver you are. The NCB belongs to you, the driver, and not your vehicle, so it is possible to transfer your NCB from one vehicle to another.

 

NCB transfer

 

Imagine you already own a vehicle on which you have NCB. Now when you buy a new car, you’ll have to buy a new insurance policy, which won’t carry over the NCB from your other car. This means your NCB on the new car is zero.

 

You might think, what was the point of driving safely and accumulating NCB if it was not transferable to future car purchases you might make?

 

Here is the thing: You can transfer your NCB! But there is a catch – only if you sell your existing car.

There are certain documents you will need to submit to the insurer of your new car:

  • Deed of sale from dealer
  • Original receipt of selling the car
  • Confirmation of receipt of the car by the dealer
  • Done by filling Form 29, Form 30.
  • NCB certificate from your previous insurer
  • You’ll have to submit Form 29, 30 (buyer-seller agreement form), and a letter requesting transfer of your NCB to the new insurer.

 

While buying insurance online, you don’t have to get a transfer certificate. NCB is transferred based on your declaration. NCB transfer must be done within 90 days of policy expiry, and the NCB certificate is valid for 3 years.

 

An important thing to remember is that NCB for one class of vehicles cannot be transferred to another class. For example, If you have a 50% NCB on your motorbike policy, then you can only transfer it to another bike, and not to a car. Similarly, NCB earned on private vehicles can’t be transferred to a commercial vehicle.

 

NCB earned abroad can be utilized in India, provided the insurance is taken out in India within 3 years of expiry of the overseas insurance policy. A declaration letter is needed in this case as well.

 

In case of damage

 

If your vehicle (or whatever you’ve insured) gets damaged a little, think a bit before you file that claim. If the amount is small, you can pay for the damages and keep the NCB safe in your pocket. You stand to gain more by paying for the repairs yourself and preserving the NCB.

 

Common things to know about NCB

 
  • NCB is for policyholders and not your car

Remember, when insurance companies see that you have not filed a claim on your insurance policy, they are rewarding you for protecting your belongings, not the item insured. So if you buy a new car and sell your old one, your existing NCB gets transferred to the new car.

  • No coverage for third party NCB

If you have third party insurance, you cannot avail of NCB. It is only applicable to the own damage premium component.

  • NCB is applicable even if you switch insurance companies

Imagine you have insurance from X company. Two years later you switch to Y insurance company. Even though you switch companies, the NCB you had at X is applicable for when you shift to Y.

 

There are some add-ons that can prevent you from losing all your NCB in case you make a claim

An NCB protect add-on can prevent you from losing all your bonuses in case of a claim, usually by lowering your NCB upon renewal to the previous slab. This only applies if you renew your policy with the same company, however.

 

Conclusion

 

Insurance is not just about protecting yourself from future losses, but insurance companies see and recognise your efforts when you protect whatever you’ve insured and reward you for the same. NCB is also one of the best ways to increase your insurance amount. 

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