Understanding No Claim Bonus (NCB) in Insurance
No Claim Bonus (NCB) is one of the most significant incentives offered by insurance companies to policyholders who do not file any claims during the policy term. It is a reward for safe and responsible driving, helping individuals reduce their insurance premium costs over time. Understanding how NCB works, how it is calculated, and its impact on insurance premiums can help policyholders maximize their savings.
What is NCB?

NCB is a discount applied to the own-damage (OD) component of an insurance policy, given to policyholders who do not make any claims during the policy tenure. It serves as an incentive to drive carefully and maintain a claim-free record.
NCB is available in motor insurance policies for both two-wheelers and four-wheelers but does not apply to third-party insurance premiums. It can significantly reduce the overall cost of renewing an insurance policy, making it a valuable benefit for policyholders.
How is NCB Calculated?
NCB starts at 20% after the first claim-free year and increases progressively for each additional claim-free year, up to a maximum limit. The standard NCB calculation is as follows:
Claim-Free Years |
NCB Discount |
1 year |
20% |
2 years |
25% |
3 years |
35% |
4 years |
45% |
5+ years |
50% (Maximum) |
Example Calculation
Let’s assume that a car owner has an insurance policy with an own-damage premium of ₹10,000:
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After 1 claim-free year (20% NCB): ₹10,000 - ₹2,000 = ₹8,000
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After 3 claim-free years (35% NCB): ₹10,000 - ₹3,500 = ₹6,500
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After 5 claim-free years (50% NCB): ₹10,000 - ₹5,000 = ₹5,000
If a policyholder files a claim, the NCB resets to zero, and they must start accumulating the discount from scratch.
How Does NCB Work and Apply to Insurance Premiums?
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NCB is Only Applicable to Own-Damage (OD) Premium:
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It does not apply to third-party liability insurance, which is mandatory by law.
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The discount is only on the own-damage component, which covers damages to the insured vehicle.
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Impact of a Claim on NCB:
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If a claim is made, NCB drops to zero in the next renewal cycle.
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Small claims for minor damages may not be cost-effective as they eliminate accumulated discounts.
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Transferability of NCB:
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NCB can be transferred when changing insurance providers.
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If a policyholder sells their car and buys a new one, the accumulated NCB can be transferred to the new vehicle.
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NCB Protection Add-On:
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Many insurers offer an NCB Protection Cover, which allows policyholders to retain their NCB even if they make a claim.
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This is useful for maintaining the discount despite an unavoidable claim.
Advantages of NCB
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Significant Cost Savings:
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Encourages Safe Driving:
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Transferable Benefit:
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Available for Both Cars and Two-Wheelers:
Challenges of NCB
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Claim Resets the Discount:
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Limited to Own-Damage Premium:
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Policy Lapse Can Result in NCB Loss:
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Cost of NCB Protection Add-On:
Final Words
No Claim Bonus is an excellent way for policyholders to save on their insurance premiums while promoting safe driving. However, it is essential to assess whether filing a minor claim is worth losing the accumulated NCB. Opting for an NCB Protection Add-On can be a good strategy to maintain discounts despite minor claims.
Insights & Suggestions
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Evaluate Small Claims Carefully: If the repair cost is lower than the potential NCB discount, it may be better to pay out-of-pocket rather than filing a claim.
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Compare Insurance Providers: Before switching insurers, ensure the new provider allows NCB transfer for uninterrupted benefits.
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Consider NCB Retention Plans: If you have a high NCB percentage, opting for NCB protection add-ons can help retain your discount even after a claim.
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Renew Policies on Time: Ensure timely renewal of policies to prevent NCB loss due to policy lapse.
By understanding and effectively utilizing NCB, policyholders can enjoy long-term savings and maintain a strong insurance record. 🚗💡
Discalimer!
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