Commutation is important in today’s time with expanding cities and one’s individual needs, hence vehicle is an important possession of each individual be it a two-wheeler or four-wheeler to commute and meet their needs. In India, it is mandatory to have insurance for your motor vehicles; one can have a third-party liability only policy at the very least or a comprehensive insurance policy. A third party (TP) only policy covers most risks that can occur by one to a third person, be it property of life due to accident; however this does not cover the damage caused to one’s own vehicle. A comprehensive Insurance Absorbs Financial Burden of damages caused by accident to one’s own vehicle. So it is beneficial to have a comprehensive insurance.
All insurance comes at a cost, be it a TP only or a Comprehensive Insurance which needs to be paid annually to keep the vehicle insured. There are several aspects that go into the process of computing the premium amount. One of the aspects is No Claim Bonus (NCB) and we feel it is an important aspect to keep the premium outflow low each year.
No Claim Bonus (NCB) in Motor Insurance:
What is NCB: This is a bonus / incentive amount (in percentage related to Own Damage Premium (OD)) given to the client as goodwill by the insurer if there is no claim in the policy year on the motor vehicle
How much is the NCB: There are defined slabs for NCB given to the person / entity for each claim free year. The slabs are as mentioned below for the consecutive claim free years
- 20% in the 1st Year
- 25% in the 2nd Year
- 35% in the 3rd Year
- 45% in the 4th Year
- 50% in the 5th Year
- As per current norms, it remains constant thereafter at 50% for the remaining claim free years
Some Crucial Things one should to know about the NCB
- On claim : Note that NCB becomes zero (0% )once there is a claim registered and thereafter again the table repeats for claim free years
- How should one save NCB? “Avoid Small Claims” As mentioned earlier, the moment you make a claim, the NCB goes off from your policy. So, it is advisable to analyze and compare the claim amount and the NCB amount before opting to make a claim.
- On change of Insurer: NCB is applicable even if one Change’s the Insurer. In case one switches from the present insurance company to another insurer, they are still entitled to No Claim Bonus, subject to confirmation from previous insurer.
- Does one loose accumulated NCB on sale of car : No, NCB is given to the person of entity owning the motor vehicle
- On sale of vehicle one can reverse the NCB on the said vehicle and obtain a NCB reserving letter
- This certificate is valid for a period of 3 years
- If a new motor vehicle is being bough on the same name as the certificate, this certificate can be produced and the NCB will be granted on the new Policy
- How does one reserve the NCB and get certificate:
- By transfer of Insurance – On sale of the motor vehicle, the insurance needs to be transferred to the new owner. The new owner needs to pay the NCB reserving amount along with transfer fee to the insurer for transfer of insurance to their name. On completion of this process the NCB reserving certificate is issued in the name of the original owner.
- If owner buys new Insurance – In this case one has to submit a copy of the new insurance to the insurer along with relevant transfer documents. The existing policy will be pro-rate be cancelled and NCB reserving certificate issued in the name of the original owner
- Is the original certificate required for transfer of NCB: Yes it is mandatory to submit the original certificate along with transfer / endorsement proof to transfer the NCB
- Is NCB valid for Third-Party Insurance: No, one can claim NCB only if one has a vehicle insurance policy that covers own damage. If one has a third-party liability-only policy, there won’t be any NCB. Also NCB is not applicable to the Third Party portion in a comprehensive policy
We feel we have given a fair understanding on No Claim Bonus, make the most of it with your motor insurance policy.
Note:
- In today’s time there are products from certain insurers which allow NCB protection in the initial years of the policy, like for the first 3 to 5 years of age. One needs to understand the premiums and coverage of this separately before deciding.
- To understand exactly about the policy coverage, exclusions etc it is important read the Policy Wordings carefully.
