How Is NCB Calculated In Car Insurance?

No Claim Bonus or NCB is a type of benefit offered to car insurance policyholders who do not make any insurance claims during a single policy term. Moreover, the No Claim Bonus can also be accumulated over a period of 5 years to get higher benefits.

The benefit offered under NCB ranges from a 20%-50% reduction in the insurance premium costs. The policyholder can avail the No Claim Bonus benefit at the time of renewing their car insurance policy. It is important to note that the No Claim Bonus is only applicable on comprehensive insurance plans. NCB cannot be used with third-party car insurance. While most car owners are aware of the NCB benefit, not many know how it’s actually calculated. 

How Is No Claim Bonus Calculated?

The No Claim Bonus is offered to car owners on the basis of how many insurance claim-free years they have. Once a policyholder passes through a full policy year without making a claim, they are eligible for a 20% reduction in premium costs during renewal. This percentage goes up to a maximum of 50% for consecutive claim-free years. An individual can easily understand how No Claim Bonus in car insurance is calculated.

Policy Term  No Claim Bonus 
1 claim-free policy year 20% reduction on premium costs 
2 claim-free policy years 25% reduction on premium costs
3 claim-free policy years 35% reduction on premium costs
4 claim-free policy years 45% reduction on premium costs
5 claim-free policy years 50% reduction on premium costs

Can The No Claim Bonus Be Cancelled?

Yes, the policyholder will lose the No Claim Bonus benefit once they make a car insurance claim. Even if they have No Claim Bonus accumulated over many years, it will be reset to zero after making a claim. The policyholder will then be eligible for the base No Claim Bonus only after 1 claim-free year has passed again. The No Claim Bonus in car insurance will also be scrapped if the policyholder fails to renew their car insurance policy within 90 days from the date of expiration of the original plan. To ensure that you do not lose your No Claim Bonus, renew your car insurance plan before its expiry or within the grace period provided by your insurer. 

Benefits Of The No Claim Bonus 

Here are the main benefits you get from the No Claim Bonus in car insurance: 

  • Saving On Insurance Premium Costs 

As mentioned above, stacking multiple No Claim Bonus over many years allows you to get as much as a 50% reduction in the price of your insurance premiums. This can help you save a significant amount of money in the long run. 

  • Transferable 

If you are planning to buy a completely new insurance plan, the good news is that your No Claim Bonus can be transferred or carried forward to your new insurance policy. There are several insurance providers online, so If you wish to switch your insurer at the time of renewal, your existing insurance company will provide you with a No Claim Bonus certificate, which can be used to carry forward your NCB with your new insurance provider. 

How To Avoid Cancellation Of No Claim Bonus

The best way to make sure that your No Claim Bonus stays intact is to avoid making any insurance claims unless absolutely necessary. If there is only minor damage to your car that can be repaired at a lower cost, you should get the repairs done out of pocket. However, if the damage is immense, you should definitely make an insurance claim. Fortunately, you can buy a car insurance add-on cover called ‘No Claim Bonus Protection’ that will allow you to make up to 2 insurance claims in a policy year without losing your No Claim Bonus benefit. 

To Conclude

No Claim Bonus or NCB is an immensely helpful feature offered by insurance companies to policyholders which allows them to save a lot of money on premium costs. While NCB in car insurance is there to help you save money, the main reason to purchase insurance is to keep your precious car financially covered against damages. There are many myths about car finance, but there is plenty of information online for all your queries. Make sure, you don’t get discouraged from claiming insurance if your car gets involved in a major accident even if you end up losing your No Claim Bonus. 

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