What is NCB in car insurance and how does it work? – Advisor Forbes INDIA


A No Claims Bonus (NCB) refers to a decrease in your premium costs if you make no claims during the term of the policy. If you have been a decent driver and are still able to avoid claims and accidents, you have AON in your car insurance. In fact, insurers offer rewards to people with excellent driving records.

How does the NCB work in car insurance?

As prices continually rise, auto insurance helps by offering annual premium reductions, thanks to the NCB. It accumulates each claim-free period, allowing you to obtain a substantial discount of 20% to 50% provided that you produce no claims for consecutive years.

An NCB essentially operates through a multi-level system. This means that the bonus increases the longer a driver is able to drive without damage. As a result, the amount of premiums you have to pay is significantly reduced.

You start by getting a 20% discount if you haven’t made a claim in your first year of coverage. Following this process, you will receive an additional 5% constant increase in the rebate during your second claim-free year. For the fifth year, you will benefit from a 50% discount as long as you do not have a claim. In a nutshell, good drivers are more likely to maximize discounts and long-term car protection.

Since claims typically cost insurance companies money and time, an SOP is also a great way to reward drivers who manage to maintain a clean driving record. However, it can be terminated if the contract is not renewed within 90 days of its current expiry date and if a claim has arisen during a policy year.

NCB protection cover may also be required to ensure that the bonus will not be reset for a large claim.

NCB Protection

You can protect your PNE by paying an additional premium. In this way, the policyholder can protect his BCN even if there is a need for a claim. Having an NCB Protector allows you to reap the benefits of an NCB instead of losing it altogether.

The expense will not be the discount you can access after a claim-free period of five years, despite the fact that there may be certain points on how you can use the insurance frequently. Also, having two or more complaints can still have a significant impact. Paying for PNE protection, however, will not prevent policy costs from rising over the years.

When are NCB protectors not needed?

With insurance policies, reading the fine print is imperative to determine certain clauses that will not be covered. There are certain cases you should keep in mind where an NCB Protector will not be applicable.

  • Auto insurance policy must be renewed within 90 days; otherwise, the BCN will reset to 0%.
  • The car must be repaired in an authorized garage or network.
  • Exceeding the allowed number of claims under the NCB Protector will render the policyholder ineligible for an NCB.
  • Fraudulent claims and misinterpretation of facts regarding a claim will be subject to cancellation by the PNE.
  • Most insurers do not allow the mid-term removal or inclusion of the NCB protector.

It is important to remember that the scope of benefits or coverage differs greatly from one insurer to another. That said, you should weigh various policies before immediately deciding on your insurance. For good measure, you can carefully compare different policies to get the best deals and protection.

Benefits of a NEP

Car owners can enjoy several benefits with a PNE in their car insurance policy. Here are a few:

More savings

The percentage of your PNE increases gradually as long as you follow the established rules. Drivers who are unable to make claims for five consecutive years are more likely to get higher premium discounts with each policy renewal.

Positive rewards

As mentioned, a PNE basically comes as a reward given to responsible drivers for how well they are able to maintain the good condition of their insured car. In this case, the policyholder earns rewards through the PNE by not submitting claims during the policy’s seniority period.

Reduced premiums

With an NCB, you save around 20% to 50% on your car insurance premium. The discount percentage is given to policyholders every claim-free year, which can then help reduce the amount of premium you are expected to pay at renewal.

Hassle-free transfer to another insurer or another car

One of the advantages of an NCB is that it is easily transferable to another car if the insured decides to change vehicles. In addition to that, it also allows you to switch insurers if you decide to purchase insurance from a new company.

Offered to policyholders, not cars

It should be noted that NCBs are granted to the owner/insured of the vehicle rather than the vehicle itself. This means that when someone sells an insured car or buys a new one, the NCB will still be there, since the car owner continually renews their car insurance policies. Also, it cannot be transferred to new vehicle owners.

Things to consider with a SOP

1. AON does not apply to third party warranties

The NCB is a benefit which only comes with the own damage premium instead of the civil liability premium, which represents approximately 15 to 20% of the overall premium. This means that you will not be eligible for an NCB discount if you only have liability insurance or add-ons. You will not get a PNE regardless of your policy renewal years or if there are any claims.

Also, dropping irrelevant additional coverage will not affect your accumulated NCB at the time of policy renewal. However, you may consider the NCB Protector add-on, which helps protect your benefits in the event of a necessary claim.

2. NCB discount is only available on policy renewals

When you take out your first full policy, you are usually not yet eligible for a premium reduction, as you have no existing claims record at this stage. You can only benefit from an AON from a 20% discount on your first contract renewal, only if there was no claim the previous year. Eventually, this discount only grows with each claim-free year where you can get up to 50% off your premiums.

3. The transfer of NCBs follows a simple procedure

To transfer your BCNs, you will need to follow a simple procedure when buying a new car or selling your old one. You will need to submit certain forms along with a PNE transfer letter to your current insurer. Subsequently, the insurer will provide you with a BCN certificate valid for three years, which you must submit to your new insurer.

Suppose you decide to switch to a new insurance provider when you are about to renew your policy. In this case, you will only need last year’s renewal notice or policy document, which sufficiently mentions your eligibility for the NCB.

On the other hand, if you take out the policy online, there will generally be no need to present the certificate since the NCB will be relayed according to your declaration. Even so, this does not give you a free pass to withdraw a claim already made available to a PNE since your new provider can verify this information with your old insurer.

4. Making small claims can lead to even bigger losses

It can be very tempting to submit a claim whenever your vehicle sustains minor damage from time to time. But before doing anything instantly, it’s wise to consider the cost-benefit analysis and think about the possible consequences. This is due to the fact that the PNE most often returns to zero, even in the case of small claims.

If you’ve been involved in a minor accident, it’s best to ignore the claim and pay for the necessary repairs yourself instead of using your car insurance. This allows you to go an entire year without any claims, thus allowing you to obtain a PNE at the time of renewal. It would be a waste to see your accumulated PNE decrease simply because of a minor disaster. It’s also important to consider your current situation so you can determine whether or not it’s the best decision to waive a claim or pursue it.

5. NCB belongs to the insured, not the vehicle

One of the best features of a No Claim bonus is that it is tied to the policyholder rather than the car. This means that you are allowed to keep your NCB even if you decide to replace your current vehicle with a new one or if you suddenly decide to change your insurance provider.

Say you bought a car in 2008 that was sold on or after your fifth policy anniversary. If you have managed to reach year 5 without any claims, you are eligible for a 50% ACN rebate. Even if you buy a new car in the same year, you can easily transfer your accumulated NCB to the policy for that new car and then claim the rebate on your first payment.


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