If you own a car in India, you’ve probably heard the term No Claim Bonus (NCB). But what exactly is No Claim Bonus (NCB) in car insurance, and how does it work? In simple terms, No Claim Bonus (NCB) is a reward given by insurance companies to policyholders who do not make any claims during the policy year.
Understanding what No Claim Bonus (NCB) in car insurance is can help you save a significant amount on your premium over time. It’s one of the most important benefits of maintaining a claim-free record.
What Is No Claim Bonus (NCB) in Car Insurance?
No Claim Bonus (NCB) is a discount offered on your car insurance premium for not raising any claims during the previous policy period. The longer you go without making a claim, the higher your No Claim Bonus (NCB) becomes.
This bonus applies mainly to the own damage premium part of your policy, not the third-party component.
How Does No Claim Bonus (NCB) Work?
To understand how No Claim Bonus (NCB) works, let’s look at how it increases over time.
As per standard industry practice in India:
- After 1 claim-free year → 20% discount
- After 2 consecutive claim-free years → 25%
- After 3 years → 35%
- After 4 years → 45%
- After 5 years → 50%
This means you can save up to 50% on your premium if you don’t make any claims for five consecutive years.
Example of No Claim Bonus (NCB)
Let’s say your own damage premium is ₹10,000.
- After 1 year (20% NCB) → You pay ₹8,000
- After 5 years (50% NCB) → You pay ₹5,000
Over time, No Claim Bonus (NCB) can lead to significant savings.
Benefits of No Claim Bonus (NCB)
1. Lower Premium Costs
The biggest advantage of No Claim Bonus (NCB) is reduced insurance premium.
2. Reward for Safe Driving
It encourages careful driving since avoiding claims helps increase your discount.
3. Transferable Benefit
No Claim Bonus (NCB) is linked to the policyholder, not the vehicle.
You can transfer it when:
- You change your car
- You switch insurance providers
What Happens If You Make a Claim?
If you make a claim during the policy year:
Your No Claim Bonus (NCB) usually resets to 0%
This means you lose accumulated discounts.
How to Protect Your No Claim Bonus (NCB)
Insurance companies offer an add-on called NCB Protection Cover.
With this add-on:
- You can make 1–2 claims
- Your NCB remains intact
This is useful if you want both protection and savings.
When Should You Avoid Claiming?
Sometimes, it’s smarter NOT to claim.
Example:
- Minor damage costing ₹2,000–₹3,000
- Your NCB discount is much higher
In such cases, paying out-of-pocket may be better than losing your No Claim Bonus (NCB).
Common Mistakes to Avoid
- Making small claims unnecessarily
- Forgetting to transfer NCB when switching insurers
- Not checking NCB percentage during renewal
No Claim Bonus (NCB) vs Claim Settlement
Some people confuse No Claim Bonus (NCB) with claim settlement ratio.
They are different:
- NCB = discount for no claims
- Claim settlement ratio = insurer’s reliability
Final Thoughts
So, what is No Claim Bonus (NCB) in car insurance and how does it work? It’s a simple but powerful benefit that rewards you for not making claims and helps reduce your premium over time. By understanding how No Claim Bonus (NCB) works, you can make smarter decisions and maximize your savings.
If used correctly, No Claim Bonus (NCB) can significantly lower your long-term insurance costs while encouraging responsible driving.
Also read: What Is IDV in Vehicle Insurance?
Also read: Zero Depreciation Car Insurance Explained
Disclaimer: This article is for educational purposes only and does not constitute financial or legal advice. Insurance products are complex; please consult with a certified advisor before making a final decision.
