Motor insurance, also known as vehicle insurance, is a policy that provides financial protection to the vehicle and its owner against various types of risks. The risks can include accidents, theft from the vehicle, damage from natural disasters, and third-party liabilities if you are at fault in an accident. Hence, this is a contract between the owner and the insurance company, where a minimum premium is paid to the company in exchange for coverage.
What it covers:
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Damage to the vehicle: This includes the repair and replacement of the vehicle in the event of any kind of accident, theft, or natural disaster.
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Third-party liability: This aspect encompasses the costs associated with injuries or property damage that you cause to others.
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Personal accident cover: Some policies provide coverage for personal accidents involving the vehicle's owner.
What is No Claim Bonus (NCB)?
NCB, or no claim bonus in motor insurance, is a discount provided by motor insurance companies to policyholders who do not file any claims during the policy year. It serves as an incentive for safe and responsible driving, and it reduces the price charged at policy renewal.
No-claim bonus in motor insurance begins at 20% after one claim-free year and can increase to 50% after five consecutive years with no claims. This benefit is tied to the policyholder, not the car, and is transferable if you move insurers. NCB saves you money and promotes safer driving practices.
How NCB Works in Motor Insurance
When it comes to motor insurance in India, the term that generally stands out is the no-claim bonus (NCB). If you have ever renewed a car insurance or a two-wheeler insurance and noticed a discount on the premium amount despite not filing any claims, the benefit of NCB is at work.
No-claim bonus is a reward provided to the insurer by policyholders for not making any claims during the policy period within a year. This is often offered as a discount on the annual premium paid by the customer during renewal. This can greatly reduce insurance costs over time.
The discount ranges from 20% to 50% and is offered to customers when they renew their policy annually. This discount is applied to the premium amount during renewal. The discount also remains applicable even if the insurer is switched, making the NCB valid and transferable, which is an essential factor when comparing the best motor insurance options.
Benefits of NCB
The No Claim Bonus (NCB) in a motor insurance policy provides substantial incentives for safe and claim-free driving. It not only lowers your insurance premiums but also promotes responsible driving.
Discount on Premium
One of the most obvious advantages of a no-claims bonus in motor insurance is a lower premium. This translates to cheaper annual expenses if you maintain a good driving record and prevent claims. Over time, this can result in significant savings on your motor insurance policy.
For example:
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After one claim-free year: 20% NCB.
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After two years of no claims, you will be eligible for 25% NCB.
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After three claim-free years, the NCB is 35%.
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After four claim-free years, the NCB is 45%.
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After five years of no claims, you will be eligible for 50% NCB.
This sliding scale rewards you for your consistent efforts to drive safely and avoid damage.
Rewards Safe Driving
The no-claims bonus in motor insurance also encourages responsible driving. Since filing a claim can diminish or eliminate your NCB, many drivers become more concerned with safety and minor damages that they can afford to pay for themselves. This not only increases road safety but also keeps your insurance rates low.
How to Retain Your NCB During Policy Transfer
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At renewal, avoiding small claims and paying for minor damages yourself can help you retain your NCB score, which will result in a discount during the next renewal.
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While selling the vehicle, asking for an NCB certificate from the insurance company will help the person to transfer the bonus collected to the new purchase made.
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Switching insurers: sharing NCB certificates or renewal documents to carry your NCB forward to the new insurer.
Common Myths about NCB
Myth: The NCB applies to the vehicle, not the policyholder.
Reality: NCB is linked to the motor insurance policyholder, not the vehicle. If you sell your car and buy a new one, you can transfer your NCB to the new auto insurance plan.
Myth: When you change insurance carriers, you lose your NCB.
Reality: Your NCB is totally transferable across insurers. If you're moving vehicle insurance providers to find the best deal, you can preserve your NCB by acquiring a certificate from your former insurer.
Myth: Making any claim will invalidate your entire NCB.
Reality: While most claims affect your NCB, some insurers offer protection for the first claim or allow partial reductions rather than entirely resetting it. It is advisable to evaluate the specifics of your motor insurance policy or consider obtaining an NCB Protection Add-On.
Conclusion
The No Claim Bonus is not just a discount- it's a reflection of your cautious and claim-free driving. By understanding and managing your NCB wisely, you can save a substantial amount on your motor insurance premiums. So, before filing a claim for minor damage, always weigh the cost of repair against the value of your NCB.
