No Claim Bonus (NCB) Protection Cover

It is of vital importance that every car owner in India while purchasing a car, also shops for a suitable insurance policy to insure their vehicle. As a car owner, you need to have a third-party insurance at least. The Indian government has made it mandatory for every car owner to insure their car. They have incorporated this rule via the Motor Vehicles Act which needs to be religiously followed in India. Disobeying the law will result in heavy fines and/or other legal actions.

No Claim Bonus (NCB)

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

Number of Consecutive Claim-free Years	Insurance Premium Discounts
1 Year	20%
2 Years	25%
3 Years	35%
4 Years	45%
5 Years	50%

NCB also reflects the kind of driver you are, the more number of NCBs you have, the more will the insurers consider you as an experienced and good driver. This may also motivate them to reward you with additional perks

NCB Protection Cover

NCB Protect is a smart way to ensure that your hard earned bonuses stay protected even if you raise a claim. This protection is usually provided to you as a rider option for the base insurance policy. Among all the rider options available, this is one of the options people favour the most due to the fact that opting for NCB cover ensures low premiums for more than a year depending on the number of NCBs accumulated. So, from the second year onwards, you are eligible for low premiums. This way the policyholder saves money on the insurance premiums. NCB cover costs about 5% - 10% of your base policy and although the NCB cover may be a little costly, the accumulated NCB will give you the added advantage of saving a good sum of money.

Key points to remember when it comes to NCB:

• 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.
• 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.
• 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.
• You lose your accumulated NCB when you don’t renew your expired policy within 90 days from the date of expiry.
• 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

The No Claim Bonus Protection add-on cover has to be purchased by the policyholder over and above the cost of the base policy. That said, only if the policyholder has a comprehensive car insurance policy can he/she buy the No Claim Bonus Protection Cover. The No Claim Bonus Protection Cover cannot be purchased independently without the car owner having already purchased a base comprehensive car insurance policy. The premium of the No Claim Bonus Protection Cover is roughly between 5% and 10% of the cost of the premium of the car insurance base policy - depending on the insurer. However, despite the fact that the No Claim Bonus Protection Cover is a little expensive, if the policyholder has 3 claim-free years, he/she will be eligible for a premium discount up to 35% of the premium cost of the car insurance policy. With the No Claim Bonus Protection Cover, even if the policyholder makes up to 1-2 claims (depending on the terms and conditions of the policy), then the NCB will not be affected, and he/she will still be eligible for the premium discount of the car insurance policy.

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

If the policyholder has had a claim-free year, he/she is eligible for the No Claim Bonus premium discount on the car insurance policy. If the car owner or policyholder is selling his/her car or purchasing a new car, the No Claim Bonus can be transferred to a fresh car insurance policy. The transfer of the No Claim Bonus can be done even if the policyholder is migrating his/her policy to another car insurer as well. However, in the case of selling one’s car, the No Claim Bonus cannot be transferred to the buyer of the car. Only the policyholder who has had a claim-free year is entitled to the No Claim Bonus premium discount.

Termination of No Claim Bonus

If the policyholder makes a claim during the policy term, then the privilege of the No Claim Bonus will be withdrawn by the insurer or will be terminated. For raising a claim to cover damages caused to the car following an accident or a mishap, or for coverage of medical emergencies, the No Claim Bonus will be terminated, unless the policyholder has the No Claim Bonus Protection Cover. In addition, if the policyholder fails to renew his/her car insurance within 90 days or 3 months from the date of expiry of the car insurance policy, then here too, the No Claim Bonus will be terminated by the insurer.

If the policyholder allows the policy to lapse, irrespective of the accumulation of claim-free years and eligibility for premium discounts of the car insurance policy, the No Claim Bonus will be withdrawn by the car insurer. Lastly, if the policyholder fails to transfer the No Claim Bonus to another insurer or to a fresh car insurance policy within a certain period, then the No Claim Bonus will be withdrawn by the car insurer.

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 to retain the No Claim Bonus of the policyholder following a claim is left up to the insurer. Following an accident, and when the policyholder raises a claim, if the accident and damage caused to the car were not the fault of the policyholder, then the insurer will try to get the money from the third party to cover the expenses. If the insurer does manage to get the coverage from the other party to cover expenses, then the No Claim Bonus will not be affected and the policyholder is still eligible for a premium discount during the following policy term. However, if the accident was not the fault of the policyholder, and the insurer does not manage to get the other party involved to cover the damages caused to the car or coverage for medical expenses, then the insurer will have to cover the cost of damages and medical expenses, and in this case, the No Claim Bonus of the policyholder will be withdrawn.

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 for a premium discount of the car insurance policy is limited to the company only. If the driver wishes to used the No Claim Bonus on his/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.

What happens to the 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 and his/her driving history and accumulation of claim-free years and not the vehicle. For example, if the policyholder chooses to sell his/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.

No Claim Bonus (NCB) Protection Cover FAQs

1. Is the No Claim Bonus offered by all insurers selling car insurance policies in India?

Yes, all motor insurers offering car insurance policy offer their customers with the No Claim Bonus. The No Claim Bonus reduces the chances of policyholders making small and unnecessary claims as they could risk not earning the premium discount for the following premium term. It also validates whether the policyholder is responsible on the road or not.

2. Is the No Claim Bonus withdrawn in the case of every claim?

Not necessarily. If the accident was not the fault of the policyholder and the insurer manages to recover the coverage or losses from the other party, then the No Claim Bonus will not be affected and the policyholder will be eligible for a premium discount the following car insurance policy term. However, whether or not the policyholder was at fault or not and has met with an accident and the insurer fails to recover the coverage or losses from the other party, then the insurer will have to meet the cost of the damages caused to the car and medical expenses if any, and this will affect the No Claim Bonus of the policyholder. The same applies if the car is stolen. If the insurer manages to retrieve the compensation for the vehicle from the other party, then the No Claim Bonus will not be affected, if not, the No Claim Bonus will be withdrawn.

3. Is it possible to use my No Claim Bonus on two different cars, or multiple cars?

No, the No Claim Bonus is applicable to just one car insurance policy and one car. The policyholder cannot use the No Claim Bonus feature for multiple cars or insurance policies. It can be transferred from one policy to another only.

4. What’s the procedure of retaining my No Claim Bonus if I’m selling my car?

If you’re selling your car and have had the No Claim Bonus or claim-free years, then this privilege cannot be passed on to the buyer or new owner of the vehicle. Along with the sale deed, or Form 29, for transfer of ownership, you will have to submit the No Claim Bonus retention certificate to the RTO (Regional Transport Office) where the car is registered. Once the retention certificate of the NCB is attested, you can use it to get premium discounts on your next car insurance policy. However, there’s a time span for the policyholder to retain his/her No Claim Bonus.

5. Is it really necessary to have a No Claim Bonus Protection Cover?

Yes, the No Claim Bonus Protection Cover basically shields the No Claim Bonus privilege even if the policyholder has made a claim or two in the policy term. With the No Claim Bonus Protection Cover, the policyholder is eligible for premium discounts in spite of raising a claim.