The no claim bonus, popularly known as the NCB, is a benefit you get when you don’t make any claim in an entire policy period. It is like a reward given to you for being a good driver. The NCB is given as a discount on the premium of the following policy tenure. It accumulates over the years and can be as high as 50%. Take a look at this article to know more about the no-claim bonus and how you can use it to your advantage.
Understanding the no-claim bonus
As mentioned above, the NCB is a bonus that’s awarded for completing a claim-free year. Many times, policyholders make small and insignificant claims, which prove to be hassling for the insurance provider. To discourage people from doing so, the concept of a no claim bonus has been introduced in motor insurance. If you can complete an entire claim-free policy year, you will have to pay a lower premium the following year. Additionally, the NCB piles up and for every claim-free year, the discount rises. Here’s a look at how much you can save if you don’t make claims for many years in a row:
| 1 year | 20% |
| 2 years | 25% |
| 3 years | 35% |
| 4 years | 45% |
| 5 years | 50% |
If you can maintain the clean slate for a period of five years, you will get your car insurance policy at half the cost, and that will prove to be very profitable for you.
Benefits of the no-claim bonusÂ
As we saw, NCB is very beneficial in car insurance. Here’s a look at the benefits at length:
- Helps you to save money
As you can see from the table above, the NCB can help you save up to 50% of your money when you look to renew your motor insurance plan. This leads to some handy savings and you can even utilise the money to get more riders and make your family flexible. This is an easy and very basic way in which you can lower your car insurance costs without having to compromise on the overall coverage value.
- Is transferable
The NCB is a reward you get for being a good driver and so it is given to you and not the vehicle. Therefore, when you change your vehicle, you are fully entitled to transfer the accumulated NCB to the policy of your new car. This is applicable when you buy a new car or a pre-used car.Â
- Easy concept
It is very easy to understand the concept of a no-claim bonus. There is nothing complicated about it. If you don’t make a claim, the insurance provider rewards you. If you make a claim, you lose the bonus. This is one of the simplest concepts in car insurance and makes it easy for everyone to understand it and make use of it.
The no-claim bonus is one of the best and most popular concepts in car insurance. If you haven’t used your bonus yet, go ahead and do so right away.
How to protect the NCB?Â
If you have a car insurance policy, you will automatically qualify for the NCB. However, if you make even one claim, you will stand to lose your entire NCB. But this can be prevented, and you can protect your bonus in the following ways:
- Be judicious about your claims
The entire logic behind the NCB is to discourage the policyholder from making unnecessary claims. Hence, you should exercise caution before you make a car insurance claim. Examine the extent of the damage for which you wish to claim. If it is a small damage and the repair costs aren’t too high, settle the bill yourself without bothering the insurance provider about it. Always equate the amount you are spending with the savings you are making with the intact NCB. If you feel the NCB will fetch you a higher discount amount, don’t bother making a claim. However, if the damage is large and significant, don’t hold back from making a car insurance claim.Â
- Get an NCB protection rider
There are many useful riders available in car insurance. One of them is the NCB protection rider. As the name suggests, you can get this add-on cover and protect your accumulated NCB even when you make a claim. The insurance provider will allow you to make a certain amount of claims for a certain amount of money, only after which your NCB will get affected. This is a good rider to have if you have a few years’ worth of NCB lying in your account. However, remember that all riders push up the overall cost of your policy, so get this rider only if it is an affordable option for you.
These are two of the simplest ways in which you can protect your no-claim bonus.
How can the NCB be terminated?Â
Here are the most common scenarios under which the NCB may be terminated:
- You make a claim
Very obviously, you will lose your NCB if you make a claim. This is why you should think twice before you make a claim. However, do remember that the primary reason to buy car insurance is to protect your vehicle and ensure it gets repaired when damaged. Do not hold back from making expensive claims just so that your no-claim bonus stays intact. Whatever decision you take, it should be a financially valuable one.
- Your policy lapses
A car insurance plan needs to be renewed every year. If you fail to renew it on time, it will lapse and you will lose the insurance coverage. Though you can revive a lapsed policy, you may stand the risk of losing your accumulated NCB. This is a big reason why you must look to renew your plan on time. Not only is it illegal to drive your car in India without a valid car insurance cover, but it is also dangerous and financially profitable, so get your policy renewal done on time without fail.
ConclusionÂ
The NCB is a key component of your car insurance policy, and you can use it to your advantage. Use the no-claim bonus to make some handy savings when you renew your policy. As you can clearly see from the points mentioned above, it is a simple and straightforward concept to understand. Read the offer documents carefully, understand the coverage and if needed, get an NCB protection rider as well. These small measures will ensure you have the best coverage at all times. Be a good driver and maintain your car plan with care and you will reap many benefits.
Disclaimer: This article is for illustrative purposes only. For further details, please refer to the policy wordings and prospectus before concluding the sales.
