Amongst the methods prescribed for reducing your car insurance policy premium, the No Claim Bonus is undoubtedly the most effective. The more you build up your claim-free bonus, the better is the cost of your policy.
If you drive carefully and often practise defensive driving to avoid accidents, you would not have raised any insurance claims by the end of the year. As a reward for the diligence that you practise on the roads, your insurance provider offers you a No-Claim Bonus that significantly eases your premium load for the subsequent year. The good news is that you need not part with this bonus even when you set your sights on selling your vehicle.
Why Do Insurers Provide No Claim Bonuses?
Increasing instances of car thefts and road accidents in India have made it imperative to be in possession of an auto insurance policy with sufficient coverage. Apart from recognising your efforts in practising road safety, insurers have several other reasons for rewarding you with a No Claim Bonus:
- Policyholders who do not raise claims prove to be less of a financial burden on the insurance company. Their low-risk status is rewarded through the NCB and other such discounts on premium, at the time of policy renewal.
- The reward also encourages the policyholder to refrain from raising claims for minor issues.
The fact that one can avail a discount of 50% on motor insurance premium just by preserving the NCB for several years is an attractive prospect from the customer?s perspective. Insurance providers can also effortlessly check the claims history of an individual and his No Claim Bonus accrual to upgrade his premium for the subsequent year.
Calculation of NCB
The NCB of a policyholder across the car insurance domain is calculated based on the following table:
|Claim Free Interval||Bonus|
|5+ Years||As subject to the terms and conditions of the insurer|
No Claim Bonus Is Not Linked To The Vehicle
The NCB is given to the policyholder, not the car. So, consider the scenario where you have accrued a substantial NCB after 4 years of cautious driving, coupled with a streak of luck, and then you decide to purchase a new car. You can still benefit from your accrued NCB, as it can be effortlessly transferred to your new car insurance policy.
- If you own more than one car, you will have to earn separate NCBs for each vehicle.
- You can transfer your accrued NCB to another vehicle owned by you, but one NCB cannot apply or be extended to more than one car.
So, how can you retain the accumulated NCB after the sale of your car?
When you decide to sell your car, the auto insurance that it is covered with will not be automatically transferred to the new owner. In case you need to do so, you have to raise an application to the insurance company to make the necessary amendments to the policy.
If you have bought a new motor insurance plan, you can transfer your accrued NCB to it. Even if you do not do this immediately, you can request the insurance company to provide you an NCB preserve letter. This is a certificate that entitles you to preserve the NCB, and it is valid for two years. However, it should be noted that the NCB cannot be retained across different classes of vehicles.
Some insurance providers allow you to transfer your NCB to your spouse. This facility is available at the discretion of the insurer, and you should get this confirmed when you are in conversation with your insurance agent.
Preserve your No Claim Bonus even after a claim
There is a way in which you can preserve your NCB even as you raise claims! An add-on NCB protector cover, when appended to your car insurance policy, gives you the ability to retain your NCB in the event of claims.
The add-on cover ensures that the NCB is not impacted if the policyholder makes only a specified number of claims within certain limits. There will also be an additional premium component corresponding to this cover. The NCB Protector scheme is more useful to policyholders who have accrued a 50% NCB score, as they wouldn?t have to part with the bonus that they have accumulated over the years.
With regard to car insurances, you pay a premium to avail financial protection at the time of a mishap. If you have been diligent enough to not file any claims for a year or more, you should make use of the No Claim Bonus offered by insurers, as it is a very attractive benefit that reduces the cost of insurance in the subsequent years. In case you choose to sell your car, you can still retain the bonus for future use.
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GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017