Claim-free year can mean years of savings: Everything you need to know about no claim bonus

For car owners, a claim-free year can translate into significant long-term savings through the No Claim Bonus (NCB), a reward offered by insurers for not raising claims during a policy period. Insurance experts say understanding how NCB works can help policyholders make smarter financial decisions and reduce annual motor insurance costs substantially.

The No Claim Bonus is essentially a discount on the own-damage component of a car insurance premium and is offered during policy renewal. Typically, the discount starts at 20% after the first claim-free year and can gradually rise to as much as 50% after five consecutive years without claims.

Importantly, NCB is linked to the policyholder and not the vehicle itself. This means car owners can retain their accumulated bonus even if they switch insurers or purchase a new car.

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How NCB helps

The savings generated through NCB can become substantial over time, especially for vehicles with higher own-damage premiums.

Based on an initial own-damage premium of Rs 35,000, the discount progression can significantly reduce the payable premium over five years. A 20% NCB in the first claim-free year lowers the premium by Rs 7,000, while a 50% NCB after five consecutive years can reduce the premium by Rs 17,500.

Insurance experts note that many policyholders underestimate the long-term financial value of preserving their NCB.

Mayur Kacholiya, Head – Motor Product at Go Digit General Insurance, said vehicle owners should carefully evaluate the long-term cost of filing small claims.

“A crucial rule of thumb for every car owner is to calculate the long-term impact of a claim before filing it. While it may be tempting to use insurance for minor repairs, a small claim can lead to significant financial loss over time,” he said.

He explained that if a repair costs around Rs 3,000 but the accumulated NCB discount is already substantial, filing a claim may erase years of premium savings.

NCB and IDV

Insurance companies also caution customers against confusing NCB with Insured Declared Value (IDV).

While NCB is a discount applied on the insurance premium, IDV represents the current market value of the vehicle after depreciation. A higher NCB does not reduce the value of the car; it only lowers the cost of insurance coverage.

However, insurers point out that certain situations can reset the NCB regardless of fault. For instance, if a vehicle is stolen and the policyholder raises a claim for the IDV amount, the accumulated NCB is reset to zero.

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NCB can be transferred

Since NCB belongs to the policyholder, it can be transferred to another vehicle or even to a different insurer.

To transfer the bonus, customers generally need to inform their insurer while selling the old vehicle, submit the required sale documents, and obtain an NCB retention or protection certificate.

Insurers also clarify that buyers cannot inherit the previous owner’s NCB. Additionally, policyholders need to remember the 90-day renewal rule. If the insurance policy is not renewed within 90 days of expiry, the accumulated NCB is terminated.

What is NCB protect add-on?

Many insurers now offer an “NCB Protect” add-on cover that allows customers to make limited claims without losing their entire accumulated bonus.

The terms differ across insurers, but some plans allow one claim during the policy year without resetting the NCB completely. Certain insurers also provide options where the NCB moves down by only one slab instead of dropping to zero after a claim.

Insurance experts say such add-ons can help policyholders protect years of disciplined, claim-free driving while still benefiting from insurance coverage during emergencies.