How NCB cuts your motor insurance cost

In auto insurance policy, if we do not take any claim in the first year, then the insurance company gives a discount in the premium while renewing the next year’s policy. In insurance parlance, it is called No Claim Bonus i.e. NCB. This bonus increases year after year. In the first no claim year, this bonus is 20 percent. For five consecutive years, the NCB increases to 50 percent. If you do not make any claim, then, you will get a discount of 50 percent on the premium. NCB’s benefit is available only in the form of a discount on own-damage policy premium. This discount is not available on third party premium. All general insurance companies give this benefit.

How is NCB calculated?

If you buy car worth 10 lakh rupees and pay a premium 40,000 rupees and do not make any claim in first year, then you will get a bonus of 8,000 rupees calculated at the rate of 20 percent. If you do not take a claim for five consecutive years and on assumption that premium remains 40,000 rupees, then, you will get a discount of 20,000 rupees. This will be calculated at the rate of 50 percent. If you do not take a claim , then, you will keep getting the discount.

GST benefit
If the premium is 40,000 rupees and after the first no-claim year, a bonus of 8,000 rupees is received on 20% rate. Earlier, 18% GST used to be levied on the entire premium, with no discount. Now, GST is levied on the amount after deductinfg the no-claim bonus. So, in the first year, there will be a profit of 1,440 rupees. This will be calculated at 18 percent of 8,000 rupees. If the NCB made is 20,000 rupees in entire five year period, then, you will save 3,600 rupees. Obviously, those who get the benefit of NCB will definitely get some savings in the form of GST.

When you will not get NCB?
If you have made a claim, then the NCB won’t be available the next year. If the policy is not renewed within 90 days of expiry, then also the NCB won’t be available even if no claim has been made.

When can you transfer NCB?

The no claim bonus can be transferred from one vehicle to another. The condition for this is that the name of the policyholder should be the same. Even if you change the insurer, you get the benefit of no claim bonus. If you do not take the claim and change the insurance company, you will still get NCB.

How will NCB be transferred?

If you change the motor insurance company and are eligible for the NCB, then, a certificate has to be made from the insurance company for this. At renewal, its certificate can be shown and transferred to the other insurer. You will have to pay the premium by reducing the amount of bonus at the time of renewal.

Can NCB on car be transferred to bike?
The NCB from one insurance company can be transferred to another insurance company. But a car’s NCB will be adjusted only against another car not any other vehicle.

What happens to NCB on selling a car?
If you are selling your car and its insurance policy has NCB, then you can retain with you. For this, you have to make a certificate by producing your policy documents and RC of the vehicle. If you do not buy a new, you can adjust this amount in its insurance policy. Usually, the validity of the NCB certificate is up to two years.
In such a situation, do not make any claim in case of small damages to your car or bike. This will eliminate your no claim bonus. Use the NCB of your policy properly.