Motor Insurance No Claim Bonus

No Claim Bonus (NCB) is a discount offered by the insurer to the policyholder for every claim-free year during the policy period. Accumulating NCB provides the policyholder with the opportunity to buy/renew a car insurance for lesser premiums unless they raise a claim, or the base policy expires. For the first claim-free year, the policyholder is eligible for a premium discount of 20%, for two continuous claim-free years, he/she eligible for 25% and so on. 

The below table shows premium discounts based on the number of claim-free years 

NCB also indicates the type of driver; the higher the number of NCBs, the more insurers will view you as a competent and experienced driver. This can also lead to additional benefits being offered to you. 

Benefits of NCB: 

The benefits of No Claim Bonus are as follows: 

1. Earn reward for maintaining the car properly: A vehicle’s insurance policy is a form of protection cover. The NCB is a reward from an insurance company that motivates you to drive responsibly. The fewer claims mean fewer damages and a higher NCB. 
2. NCB depends on the owner and not the vehicle: A no-claim bonus rewards the owner for maintaining responsible ownership of their vehicle. Even if you sell your vehicle, your no claims bonus remains with you and in most cases, applies to the next vehicle you buy. 
3. Save on premium amount: Depending on how many years you don’t make an insurance claim, you can save up to 20-50% on your premiums with a no-claim bonus. 
4. NCB can be transferred: NCBs are easy to transfer from insurer to insurer. All you have to do is get your NCB from your old insurer and transfer it to your new insurer. 

NCB Protect is an easy way to protect your hard earned bonuses even if you file a claim. It is usually offered as a rider option on the base policy. Of all the rider options, this is one that people prefer the most because opting for NCB cover ensures low premiums for over a year (depending on how many NCBs you accumulate). So, from the 2nd year, you are entitled to low premiums. This means that the policyholder saves on  car insurance premiums. 

NCB cover costs around 5% – 10% of the base policy. While the cover may be a bit expensive, the accumulated NCBs will provide you with the added benefit of saving a good amount of money. 

Key Points to Remember When it Comes to NCB: 

1. In case you want to renew/transfer your policy to another insurer, you can easily transfer the accumulated NCB due to the NCB Protect cover. 
2. Even when you sell your car, you can transfer your car insurance policy from your name to the buyer’s name without giving away your NCB. You can keep your NCB till you buy a new insurance and then add it to the new base policy for continued premium discounts. To do this, you need to provide an NCB retention letter. 
3. Once you raise a claim, the accumulated NCB will be used for claim settlement unless you avail an NCB Protect that retains your NCBs in spite of a claim. 
4. You lose your accumulated NCB when you don’t renew your expired policy within 90 days from the date of expiry. 
5. If the car insurance policy is cancelled before the policy period ends, you can’t earn any NCB. 

Cost of a No Claim Bonus (NCB) Protection Cover:

No Claim Bonus Protection is an add-on to your base car insurance policy and must be purchased by you. However, you can only purchase this cover if you have a comprehensive car policy. You cannot purchase this cover on your own. The premium of the no claim bonus protection cover varies from insurer to insurer. It ranges from 5% to 10% of your car insurance premium. The No Claim bonus protection cover is slightly more expensive than the base car insurance policy premium. However, if you have three years of claim-free, you will get a premium discount up to 35%. Even if you have 1-2 claim history (depending on your policy), you will still get the premium discount. 

Who needs a No Claim Bonus Protection Cover? 

While the No Claim Bonus Protection Cover is beneficial as mentioned above, all car owners that wish to protect their driving history and be eligible for premium discounts should opt for the No Claim Bonus Protection Cover. Even if the policyholder makes up to 1-2 claims a year, the No Claim Bonus privilege is protected. For expensive cars especially, car owners should ensure that they have the No Claim Bonus Protection Cover to get premium discounts on their car insurance policy. 

Transfer of No Claim Bonus: 

While the benefits of the no claim bonus protection cover are mentioned above, the No Claim bonus protection cover is available to all car owners who want to protect their driving record and be entitled to premium discounts. Even if your policyholder makes 1-2 claims per year, you can still enjoy the No Claim bonus privilege. Premium discounts on your car insurance policy are especially available for expensive cars.

If you make a claim within the term of your policy, then either the insurer withdraws the privilege of your No Claim Bonus or your policy terminates. If you raise a claim to pay for damage to your car as a result of an accident or an incident or for medical emergency coverage, then the insurer terminates your No Claim Bonus. If your policy terminates if you don’t renew your car insurance within 90 days of the expiry date or 3 months after the expiry date of your car insurance policy, then your insurer terminates your no claim bonus. This applies unless you have the no claim bonus protection cover.

If you let your policy lapse, regardless of how many claim-free years you have and how many premium discounts you are entitled to under your car insurance policy, your car insurer will withdraw the No Claim Bonus. If you fail to transfer your No Claim Bonus to a different insurer or to a new car insurance policy, within a certain period of time, your insurer will withdraw your No Claim Bonus. 

Validity of the No Claim Bonus: 

The No Claim Bonus can be purchased either when the policyholder is buying a fresh car insurance policy or is renewing the existing car insurance policy. The No Claim Bonus, which has to be purchased over and above the premium cost of the car insurance policy, is roughly 5%-10% the cost of the premium of the car insurance premium. If the policyholder has earned the No Claim Bonus within a claim-free year, the privilege to claim a premium discount is valid for a span of 2 years. This is if the policyholder does not drive his/her car for the two years, or doesn’t own a car insurance policy. Following the 2-year span to claim the No Claim Bonus, the privilege of the No Claim Bonus will be withdrawn by the insurer. 

No Claim Bonus Following an Accident or if the Car is Stolen: 

Whether or not the insurer retains the policyholder’s No Claim Bonus after a claim is at the insurer’s discretion. 

In the event of an accident and when a claim is made, the insurer will attempt to recover the money from a third party to pay the costs of the accident. 

If the insurer manages to recover the third party’s money to pay the expenses, then your No Claim Bonus is not affected and you’ll still be entitled to a premium discount for the next policy term. 

If, however, the accident wasn’t your fault and the insurer isn’t able to get the third party involved to pay for the damages to your car or cover your medical bills, then you’ll have to pay the cost of the damages and medical bills, and in that case, the insurer will withdraw your No Claim Bonus. 

In the case of the car being stolen as well, if the insurer manages to retrieve the compensation for the lost or stolen vehicle from the other party that is involved, then the No Claim Bonus will not be affected. However, if the insurer has to make the payout for compensation of the stolen car, then whether it is the fault of the policyholder or not, the No Claim Bonus will be terminated. 

No Claim Bonus in Case of a Commercial Vehicle: 

Commercial companies purchase the No Claim Bonus in the name of the driver of the commercial vehicle or its employee, but the privilege of a premium discount on the car insurance policy is limited to the company only. If the driver wishes to use the No Claim Bonus on his or her private car insurance in the long run, then the insurer in such a case will deny the request for a premium discount that comes with the No Claim Bonus feature. 

No Claim Bonus if the Car Insurance Policy is Transferred to Another Insurer: 

As already mentioned, if the policyholder wishes to transfer his/her car insurance policy to another insurer, to get a better premium rate and services with regard to the car insurance policy, then the No Claim Bonus can be transferred as well. The transfer of the No Claim Bonus will push the insurer to offer the best possible car insurance premium rate. However, the insurer will do a background check with the previous insurer to see if the policyholder has actually earned the No Claim Bonus with claim-free years before setting the best possible premium rate for the car insurance policy. 

Is the No Claim Bonus for the  Vehicle or for the Policyholder? 

The No Claim Bonus is linked to the policyholder, his or her driving history, and the accumulation of claim-free years, not the vehicle. For example, if the policyholder chooses to sell his or her car, then the no-claim bonus cannot be transferred to the new owner of the vehicle. The policyholder has the choice in this case to transfer the no-claim bonus to a fresh car insurance policy.