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Friday, December 03, 2021

No claim bonus an important factor in your motor insurance policy

As things become expensive with each passing year, the No Claim Bonus actually makes sure that your insurance policy premium becomes more affordable every time you renew it.


Updated: October 22, 2021 6:15:12 pm
You can, in fact, save up to half the annual premium of your motor insurance policy through effectively using the No Claim Bonus every year.

Written by Tarun Mathur

Owning a vehicle in India is not only a matter of pride, but it also brings with it a sense of independence. You use it to commute to work, to run daily errands, to take your family out for movies and to the shopping mall, and even vacations.

However, owning a vehicle is also sometimes a costly affair. After all, it is among the most expensive investments most middle-class families make in their lives, second only to buying a home. Add to that, the recurring cost of a motor vehicle insurance policy, which is not only crucial to keep your beloved vehicle safe but is also mandatory by law.

So it is only natural if you wonder about ways to save on this recurring cost. It is okay to do that as long as you do not lose sight of the big picture and do not compromise your motor vehicle’s protection. And this is where the No Claim Bonus (NCB) comes into the picture serving as a way to reach that balance between having the right cover for your car while also making sure that the insurance premiums do not get out of hand.

As things become expensive with each passing year, the No Claim Bonus actually makes sure that your insurance policy premium becomes more affordable every time you renew it. Of course, this benefit comes with certain conditions.

What is a No Claim Bonus, you ask? As the name suggests, it is a discount on the vehicle’s insurance premium which you get on renewal as long as you drive carefully and do not make an insurance claim during a policy year. So essentially, this benefit rewards you for safe driving and the more you ride without an accident and without an insurance claim, the higher the NCB you get.

You can, in fact, save up to half the annual premium of your motor insurance policy through effectively using the No Claim Bonus every year. As per the current norms in India, you can avail a No Claim Bonus of 20 per cent on your premium if you do not make a claim for one year. For two subsequent years of no claims, this bonus increases to 25 per cent; 35 per cent for three years, 45 per cent for four years, and finally, 50 per cent discount on premium for five years of no claims.

However, soon as you make a claim, the accumulated NCB lapses and you would have to make the full premium payment on the next policy renewal. So sometimes, for minor repairs, you can even pay from your pocket if you estimate that the repair cost is lower than the No Claim Bonus you would forego if you make a claim. On the other hand, many insurers also offer the option of getting a payable NCB retention rider, or add-on feature, wherein you can retain the accumulated No Claim Bonus to a certain specified limit even if you make a claim.

Apart from making a claim during a policy year, another reason the NCB is terminated is if you do not renew your vehicle insurance policy within three months from the date of expiry of the current policy. So, in order to make the best use of the No Claim Bonus, it is crucial that you renew your vehicle insurance policy on time, and do not let it lapse.

While the NCB feature is a great way to save on insurance premiums, many policyholders are often stuck with an insurer even if they are not happy with it because they think they would lose the entire accumulated NCB if they switch their vehicle’s policy to another insurance company. However, most insurance companies these days allow the transfer of the No Claim Bonus when you switch over to them from another insurer.

Moreover, the No Claim Bonus is not vehicle-specific but rider-specific. What this essentially means is that even if you sell your car or two-wheeler and after using it for a few years, and then go on to buy a new one, you can get the accumulated No Claim Bonus on the insurance premium of your new motor vehicle. All you need to do is furnish a copy of the ownership transfer certificate of your old vehicle along with the old registration certificate, along with a written request to transfer the NCB to the new policy. You also need to take the NCB certificate of your previous insurance policy from the insurance company, which is usually valid for up to three years. You can transfer the NCB to the new vehicle insurance policy anytime during this time frame. This would bring down the cost of insurance for your new car. So whenever you sell an old car, it is a good idea to get the NCB certificate issued in your name.

The author is CBO-GI at Policybazaar.com. Views expressed are that of the author.

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