No Claim Bonus: How It Works And Why It Matters

Table of Contents

Insurance is a vital tool for financial protection, whether it’s for vehicles, health, or home coverage. One of the most valuable benefits policyholders can receive is the No Claim Bonus (NCB). It serves as an incentive for safe and responsible behavior, rewarding individuals for not making claims during the policy period.

Understanding how NCB works, its benefits, and how you can maximize its value is crucial. This article provides an in-depth guide on No Claim Bonus, its calculation, transferability, and why it plays a significant role in insurance policies.

What is No Claim Bonus (NCB)?

NCB is a discount offered by insurers to policyholders for not filing any claims during a policy term. It is a reward for maintaining a clean record, whether in car insurance, health insurance, or other applicable policies. This discount accumulates over consecutive claim-free years and can lead to substantial savings on premium costs.

Where is No Claim Bonus Applicable?

NCB is commonly associated with:

Motor Insurance (Car & Two-Wheeler Insurance)
Health Insurance
Home Insurance (less common but available with some insurers)

While NCB is most prevalent in motor insurance, certain health insurance policies also offer discounts for remaining claim-free.

How Does No Claim Bonus Work?

Calculation of NCB

NCB is typically offered as a percentage discount on the renewal premium. The percentage increases with each consecutive claim-free year, reaching a maximum cap as per insurer policies.

NCB in Motor Insurance

For motor insurance, the typical structure is:

Claim-Free Year	NCB Discount on Premium
1 Year	20%
2 Years	25%
3 Years	35%
4 Years	45%
5 Years & Above	50%

NCB in Health Insurance

Some health insurance policies offer NCB as:

Increased Sum Insured (e.g., 10%-50% increase in coverage for every claim-free year)
Premium Discounts (less common but available with select insurers)

Claiming and Retaining NCB

NCB is applicable only if no claims are made during the policy term.
If a claim is filed, the NCB is reset to zero or significantly reduced.
NCB is attached to the policyholder, not the vehicle, meaning it can be transferred if you switch insurers or buy a new vehicle.

Benefits of No Claim Bonus

1. Cost Savings on Premiums

A higher NCB can lead to significant savings. A policyholder with a 50% NCB will pay only half of the renewal premium compared to someone without a bonus.

2. Encourages Safe and Responsible Behavior

Since avoiding claims results in discounts, policyholders are encouraged to drive safely and maintain their health to prevent unnecessary insurance claims.

3. Transferability of NCB

If you sell your vehicle and purchase a new one, the NCB remains with you and can be applied to the new vehicle’s policy. Similarly, in health insurance, NCB benefits can be carried forward when renewing the policy with the same insurer.

4. Additional Coverage in Health Insurance

In health policies, NCB increases the sum insured over time, giving policyholders additional protection without raising premiums.

No Claim Bonus in Different Insurance Types

Motor Insurance NCB

Applicable to the own-damage portion of motor insurance (not third-party liability).
Transferable when switching insurance providers.
A claim-free history can lead to a 50% discount on premiums after five years.

Health Insurance NCB

Comes as either a premium discount or an increased sum insured.
Helps policyholders build higher coverage over time without additional cost.
Some insurers allow policyholders to accumulate benefits up to 100% of the sum insured.

Home Insurance NCB

Less common but offered by some insurers for home insurance policies.
Typically provides a discount on the renewal premium.

How to Preserve Your No Claim Bonus

If you want to retain your NCB benefits, consider the following:

1. Avoid Small Claims

If the repair or medical expense is minor, it may be more beneficial to pay out-of-pocket instead of losing your accumulated NCB.

2. Opt for an NCB Protection Add-On

Some insurers offer an NCB Protection Cover, which allows policyholders to retain their NCB even after making a certain number of claims.

3. Transfer Your NCB When Changing Insurers

If you switch insurance providers, ensure that you transfer your accumulated NCB to the new policy. Insurers generally require a proof of NCB from your previous insurer.

4. Renew Policies on Time

If there is a lapse in policy renewal beyond a specified period (usually 90 days in motor insurance), the NCB benefit may be lost.

Common Myths About No Claim Bonus

Myth 1: NCB is Linked to the Vehicle, Not the Owner

Fact: NCB is linked to the policyholder, allowing them to transfer it to a new vehicle or insurer.

Myth 2: A Claim Results in Total Loss of NCB

Fact: Some insurers provide NCB protection add-ons that allow policyholders to retain their bonus despite making a claim.

Myth 3: NCB Applies to Third-Party Insurance

Fact: NCB is only applicable to own-damage coverage and does not apply to third-party liability insurance.

Myth 4: NCB is Non-Transferable Across Insurers

Fact: Policyholders can transfer their NCB when switching insurers by providing proof of their claim-free record.

Also Read: What Is Prize Indemnity Insurance And How Does It Work?

Conclusion

No Claim Bonus is a powerful way to save on insurance premiums while promoting responsible behavior. Whether you are a vehicle owner, health policyholder, or homeowner, understanding how NCB works can help you maximize benefits and ensure cost-effective coverage. By maintaining a claim-free history, transferring NCB correctly, and using add-ons like NCB protection, policyholders can make the most out of their insurance policies.