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What is NCB (No Claim Bonus) in Car Insurance & How it Works?

In India, the number of four-wheelers is increasing at a rapid rate. But before you buy a car in India, you must know that motor vehicle insurance is compulsory in India and you have to avail it while buying a car. But the good news is, that most insurance providers provide policyholders with NCB benefits.

Now, most people in India are unaware of what NCB even means in the first place! That's why, we're here to answer a commonly asked question,

What is NCB in Car Insurance & it's Full Form?

NCB actually stands for ‘No Claim Bonus’. It is actually a kind of reward that the car insurance providers provide to their customers when they do not file any claim in a policy year. In this reward, the insured person gets a discount on their premium when they renew their insurance in the next policy year.

How NCB in Car Insurance Works?

While everything else around you rises in price, your car insurance gives you a special benefit by actually giving you the choice to reduce your car insurance premium. How does it work, you ask?

Well, it works almost like a rewards system. You start by gaining a 20% NCB discount if you haven’t made any claims for your first policy year. Consequently, you keep gaining an additional 5% from your second consecutive year of making no claims.

This can go about a reduction of 50% in your sixth consecutive year. Long story short, the better driver you are, the better you protect your car- the better it works out for you in the long run.

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No Claim Bonus Calculator

After understanding what an NCB policy is in insurance terms, the next big question is – how much the no claim bonus for car insurance is.

Using a No Claim Bonus calculator is not that difficult. In fact, many insurance companies give you access to a No Claim Bonus Calculator on their websites that will help you calculate your No Claim Bonus amount accordingly. The same usually starts from the second year of your respective policy.

According to the present norm, NCB in India starts with 20% and goes up to 50% in the sixth year. No Claim Bonus percentage for any four-wheeler is generally calculated in the following way.

NCB Calculation for Car Insurance

Claim free years	No Claim Bonus
After 1 year	20%
After 2 years	25%
After 3 years	35%
After 4 years	45%
After 5 years	50%

Let us understand with an example.

On the first renewal, the policyholder is entitled to a 20% discount if he has not made a claim. In the second renewal, he will receive a 25% discount if he has not made a claim.

Therefore, his premium would be lesser every year, and he would have saved his money, if he had not made a claim during his policy tenure.

Thus, the money saved on the Own Damage premium increases annually as the discount increases annually, to a maximum of 50%, till there are zero claims.

When is a No Claim Bonus in Car Insurance Applicable?

NCB (No Claim Bonus) is a discount applied to your existing car insurance premium. Here's when it is applied:

Policy Renewal: NCB is typically applied when doing your car insurance policy renewal. It can be applied with the Comprehensive policy and Own Damage add-on cover, but not the Third-party policy.
Claim-Free Period: Your NCB discount becomes higher when you don’t make any claims on your car insurance during the policy period.

Is it a Good Idea to Make Small Claims and Lose No Claim Bonus?

No! In case you’ve got into a minor accident or are planning to use your car insurance for a small tyre burst, you could instead skip the claim and pay for its repairs yourself (only if you think it’s feasible!) and you can go a year without any claims and therefore gain a No Claims Bonus during your car insurance renewal.

Benefits of NCB in Car Insurance

1. Gives you positive rewards: The NCB is nothing, but a means to reward you for being a good and responsible driver and car owner.

2. Connected to you and not your car: NCB is connected to you as an individual and not your car. This means, no matter which car you have- as long as you have been renewing your car policies before its expiry date, you can continue to benefit from a NO Claim Bonus for your car insurance.

3. Save on car insurance premium: The benefit everyone loves! Discounts! A No Claim Bonus will save you at least 20% of your annual car insurance premium.

4. Easily Transferable: In situations where you’re either changing your insurer or car, the process to transfer of your NCB is simple and hassle-free. The only thing you need to ensure is, to shift your policy before your current one already expires.

How to Retain NCB Even After Filing a Claim?

Yes, there is a way to retain your NCB even after you have filed for a claim in a policy year – by opting for NCB Protection Add-on. This add-on is an optional cover that ensures your bonus doesn’t reset if you file a necessary claim.

Please note that since this is an optional cover, you can buy it only with a comprehensive car insurance policy or a standalone own-damage cover by paying an additional premium. Also, not every insurance company offers this benefit, so confirm with your insurer beforehand.

NCB Protection Cover Exclusions

Following are the cases where this add-on will not be applicable:

When you have exceeded the number of claims allowed under the NCB Protection add-on.
When any fraudulent OD claims have been made or there is any discrepancy in the facts regarding a claim.
The NCB will drop to 0% if you haven’t renewed the car insurance policy within 90 days of the expiry or stipulated date.
If you try to include or remove the NCB Protection cover mid-term.
Your car must be repaired in the insurance company’s network garage.

Important Things to Know about No Claim Bonus in Car Insurance

When is NCB Cancelled?

It is seen that NCB is very beneficial. As long as you do not claim, you will continue to get the benefit of NCB protection.

But if you have to claim for any reason during a policy year then you will not get the benefit of NCB in the next policy year.

It is important to know that if you do not renew your existing insurance policy within 90 days from the date of expiry then your NCB will be terminated, and you will not get the benefit of No Claims Bonus anymore. Hence you should always renew your policy timely.

Is NCB Applicable to Third Party Insurance?

No! Policyholders can avail of the benefit of No Claim Bonus only with the Comprehensive policy or Own Damage cover. It means you will NOT get any NCB discount against your car insurance if you own only a third-party cover.

However, making a third-party claim won’t impact your accrued NCB at the time of renewing your policy.

How to get NCB Certificate Online?

At the time of buying an insurance policy, the policyholder is provided with an NCB certificate, and it now depends on the policyholder whether he makes any claims or not in the policy year. If he claims, then he will not be entitled to the NCB benefit for the next year but if he doesn't claim for the entire year, he will be eligible for the NCB benefit.

To get a No Claim Bonus (NCB) certificate, the policyholder can contact the insurance provider and request one. For that he needs to provide your policy number and personal and vehicle details. After verifying the details, the insurer will issue the NCB certificate.

What is Previous NCB in Insurance?

Wonder what happens if you haven’t made any claims yet and decide to sell your car in the middle of the year or, in another case buy another car?

If you buy an old car from a dealer or any third-party and if the car is eligible for NCB then you can apply for a no claim bonus transfer. In this case, all that you have to do is, write to your insurance provider informing them about the sale of your old car and request them to transfer your NCB to the new car.

In case you’re now buying a new car insurance policy with Digit, all you have to do is mention your current NCB and the name and policy number of your previous insurer (if you’re buying a new car policy with us for the first time) and we’ll take care of the rest.

What to do with the No Claim Bonus (NCB) on Your Existing Policy?

If you have NCB on your existing policy and decide to sell your car in the middle of the year or, in another case, buy another car, there are two cases you need to know:

If you buy an old car from a dealer or any third-party and if you are eligible for NCB, then you can apply for a no claim bonus transfer. In this case, all that you have to do is write to your insurance provider informing them about the sale of your old car and request them to transfer your NCB to the new car.
In case you’re now buying a new car insurance policy with Digit, all you have to do is mention your current NCB and the name and policy number of your previous insurer (if you’re buying a new car policy with us for the first time) and we’ll take care of the rest.

How to Claim your No Claim Bonus for a New Vehicle Insurance Policy?

This depends on whether you’re buying your new car insurance online or through an agent, or offline.

In case you are buying your new car insurance policy offline or via an agent, you will need to transfer your No Claim Bonus by submitting your buyer-seller agreement- Forms 29 and 30 along with a letter requesting the transfer of your NCB from your existing insurance company.

The respective insurer will then issue an NCB certificate which you’ll need to submit to your new car insurance company.

However, if you’re going to buy your new car insurance online, you don’t need to do any of this. All you need to do is declare the right NCB and old policy number and name of the insurer and your new insurance company will manage the rest of the process.

After the submission of the above documents, no claim bonus will be transferred to the new car. Based on the existing NCB certificate the customer can avail the benefit of the discount on the insurance premium for the new car.

What are the Documents Required for NCB Transfer?

You have to provide the following documents along with the application:

Copy of delivery note that you’ve received for the sale of the old car
Copy of insurance policy of the old car
Copy of the booking form that you received for purchasing the car
Transfer application
Buyer-seller agreement (Forms 29 & 30)
Copy of transferring the old RC if you’re selling your old car
NCB certificate from the insurer

What Happens to NCB if the Vehicle is in an Accident or Stolen?

If your car gets in an accident or gets stolen, your NCB discount is completely or partially lost if your insurer has to pay out – even if it's not your fault.

Whether it’s a case of accident or theft, your NCB will be reset to zero unless most damage expenses are recovered. For example, if you were hit by a third-party and they agree it was their fault, your insurer can recover all the costs from them, thus saving your NCB.

FAQs about No Claim Bonus in Car Insurance

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Can I have a No Claim Bonus for more than 1 car?

Your no claims bonus only applies to one car. So, if you treat yourself to a brand-new second car on your birthday, you’ll have to get it insured separately – and build up its own NCB by not making a claim for it.

Can I transfer No Claim Bonus from one insurer to another?

If you’re changing insurance companies, you can transfer your no claims bonus from one insurance provider to another. And if you’re transferring to a new insurer at the time of your policy renewal, all you must show is your last year’s policy document or renewal notice mentioning your NCB.

Does a No Claim Bonus apply to third-party car insurance?

No, the NCB doesn’t cover the part of your premium that’s for third-party liabilities, which accounts for around 15-20% of your premium. Which means that you can’t avail of NCB if you have only third-party insurance – you will need to have Comprehensive insurance or Own Damage car insurance to be eligible for NCB. A third-party claim, however, doesn’t affect your NCB.

What if NCB is zero?

If your NCB is zero, you will not be able to get any discount at the time of renewing your car insurance policy.

What is the maximum No Claim Bonus discount I can avail in India?

The maximum NCB discount for car insurance in India is 50%. It is applicable only if no claims have been raised for five years in a row.

Is a No Claim Bonus an addon?

No, a No Claims Bonus is not an add-on. If you bought an Own Damage or Comprehensive car insurance policy, you are eligible for a no claims bonus. Yes, if you wish to protect the no claims bonus you have earned over years of not having any claim, you can purchase an addon of No Claim Bonus Protection.

How long is NCB valid for?

Your NCB is valid until you make your next claim.

How to know my NCB in insurance?

You can check your applicable NCB in car insurance by referring to the NCB slabs, which are applicable during the policy renewal process. The NCB calculation will also be mentioned in your policy document.

How can I get my NCB certificate?

You can get an NCB certificate by contacting your previous insurer and requesting them for an NCB certificate.

What are IDV and NCB in car insurance?

IDV or Insured Declared Value is the maximum amount you will be compensated for if your car is stolen or suffers a total loss. While NCB is the discount given on the premium when one does not make a claim in the policy year. This discount is used at the time of the next car insurance renewal.

How can I protect the accumulated NCB?

You can protect the accumulated NCB by opting for the NCB protection cover during your next renewal process.

How does NCB impact on the overall car insurance premium?

If you haven’t made any claims in your first policy year, you will be given a 20% discount on your car insurance premium while you renew your car insurance policy. Just make sure you renew before your policy expires! Consequently, as the years go by without any claims made, your discount will keep increasing from 20% to up to 50%!

What happens to my NCB if I raise a claim for a small incident?

If you raise a claim even for a minor incident, your accumulated NCB will become zero. A claim is a claim no matter how major or minor the incident is, and it will affect the NCB calculation.

Should I get an NCB protection cover?

New drivers who want to take care of their brand-new car while also saving money can get this cover. It will let you raise up to two claims in a year while keeping their NCB component. This will result in a cheaper car insurance premium on the next renewal.

Is NCB applicable even if I change the type of car?

Yes, your No Claim Bonus discount is applicable even if you change the type of car. For example, if you change your car from a sedan to an SUV, then your NCB will be transferred to your new car, no matter its type.

Can I cash-out the No Claim Bonus if I do not wish to continue with the car insurance?

No, you cannot do this since there is no option to cash-out NCB. Also, it is given as a discount on policy renewal and is only applicable on Comprehensive insurance, which is non-mandatory policy.

What happens to NCB if a car is damaged beyond repair due to a major car accident or theft?

In such a case NCB will not be applicable as it is applied only at the time of policy renewal when there is no claim, and car accident or theft do not meet this condition.

Can the No Claim Bonus be retained in case of lapsed motor insurance?

No, you cannot retain NCB in car insurance in case of lapsed insurance policy.

Do you lose NCB if you cancel your insurance policy?

Yes, you will lose out on your NCB if you cancel your insurance completely before it expires. However, if you’re only looking to change your insurer, it’s better to declare your NCB or get your NCB certificate issued from your existing insurer to your new insurer and continue to benefit from your existing NCB instead of cancelling it altogether.

When does NCB terminate?

NCB is terminated if:

You have made a claim during a policy year. Thus, no NCB discount will be given in the next year.
If you have not renewed your car insurance policy within 90 days from the date of expiry of the existing policy.

What is the maximum no claim bonus applicable on car insurance?

The maximum NCB applicable on car insurance is up to 50%. In the first consecutive year of no claims, your NCB starts at 20% and eventually goes up to 50% if you’ve had no claims in five consecutive years.

Do insurance companies check the no claim bonus & verify the claim history?

Yes, all insurance companies do check if the no claim bonus and other details declared while buying your car insurance company was right or not. In case of any false declarations made, your insurer may not issue or cancel (if already issued) your car insurance policy.

Do you lose a no claim bonus if you stop driving?

No, you don’t lose your non-claim bonus if you stop driving. You only lose your NCB if you make a claim in the policy year, or don’t renew your car insurance policy before its expiry date.

How much NCB will I lose after raising a claim?

After a claim, you will lose all of your NCB discount. However, if you have opted for the NCB protection cover, then you may not lose your NCB only for a few specific types of repairs.

This amount depends on how much accumulated NCB you have and the policies of the insurance company.

How to claim NCB?

You cannot claim NCB as it will be calculated automatically and applied as a discount on your policy renewal, if you meet the required terms and conditions.