How Can NCB Help You Get Lower Car Insurance Premiums?

Car ownership comes with both financial expenses and maintenance responsibilities. One of the recurring expenses that car owners face is the insurance premium. These insurance premiums, while a necessary expense, can cause financial strain.

The good news is that there are several smart ways to reduce this cost. Of these, one of the most effective is by taking advantage of the No Claim Bonus (NCB). Often overlooked, this benefit rewards careful drivers and can lead to substantial savings over time.

Curious how this works? This article will explain what NCB in car insurance means, how it works, and strategies to maximise it for reduced premiums.

What is NCB in Car Insurance?

The No Claim Bonus (NCB) is a reward insurance companies offer to policyholders who do not make any claims during their policy term. It is essentially a discount on the premium for the following year that acknowledges the driver’s safe and responsible driving behaviour.

NCB in car insurance is linked to the policyholder instead of the vehicle. This means that it can be transferred even if you switch insurers or buy a new car. This incentive encourages claim-free driving and helps reduce the long-term cost of car insurance.

Benefits of NCB in Car Insurance

NCB in car insurance serves as a long-term reward system that can offer several advantages to careful drivers. Some of its key benefits include:

• Significant Cost Savings Over Time: One of the primary benefits of NCB is the reduction in your car insurance premium. The discount increases with each consecutive claim-free year and can lead to substantial savings in the long run. 

• Reward for Safe and Responsible Driving: NCB recognises your careful driving behaviour. You can protect yourself while also being rewarded with lower premiums by not raising claims for minor damages and maintaining a clean record.

• Transferability Between Insurers: Your NCB doesn’t go to waste if you switch your insurance provider. It is transferable and can be carried forward to your new policy. This ensures continuity of benefits even if you change companies.

• Applicable Even When You Buy a New Car: NCB is linked to the policyholder and not the vehicle. This means you can retain your bonus even after purchasing a new car. This gives you a head start on premium savings when insuring your new vehicle.

How Does NCB in Car Insurance Work?

NCB serves as an incentive for policyholders who do not submit any claims during the policy term. This is how it works:

• Claim-Free Period: You must go an entire policy year without filing any claims in order to be eligible for NCB. Your NCB discount will increase with the number of years you go without making a claim.

• Premium Discount: Your renewal premium is reduced by the insurer according to the number of years you have been claim-free. The discount usually ranges between 20% and 50%, depending on how long you haven’t filed a claim.

• Accrual of Benefits Over Time: NCB benefits accumulate over time. For instance, you might receive a 20% discount in the second year of your policy. This could rise to 25% if you remain claim-free for another year, and so on.

• Impact of Filing a Claim: You forfeit the discount you have accrued and your NCB is reset to zero if you file a claim. However, neither the claim nor the policy’s basic coverage are affected.

• Transferability: Your NCB can be transferred if you change insurers or buy a new car. This enables you to keep your discount even in the event that policies change.

• NCB Expiration: Some insurers may have a time limit on when you can use or transfer the NCB. To keep this benefit, it’s critical that you renew your policy on schedule.

This system encourages policyholders to drive sensibly by providing a monetary reward for upholding a clean driving record.

How is NCB in Car Insurance Calculated?

NCB in car insurance is calculated as a percentage discount only on the own-damage portion of your premium rather than the total premium amount. This discount increases with each consecutive claim-free policy year. Here’s how NCB is typically calculated:

Note: The NCB is capped at 50% after five consecutive years without making a claim. This is the highest discount you can receive. The NCB does not rise any further after this number of claim-free years.

Let’s examine an illustration. If you have three claim-free years under your belt and your own-damage premium is Rs 10,000, you will receive a 35% NCB. This will save you Rs 3,500 on your renewal premium.

Tips to Maximise the Benefits of NCB in Car Insurance

The NCB can drastically reduce your car insurance costs when properly handled. The following tips will help you get the most out of this reward system:

• Avoid Small Claims: Think about paying for minor repairs or damages out of pocket if they are less expensive than the NCB benefit you stand to lose. This can help you maintain your bonus and accrue larger savings over time.

• Choose an NCB Protector Add-On: This add-on lets you keep your accrued NCB even if you file one or two claims during the policy period. It’s a useful feature for cars that are older or used more frequently.

• Drive Safely and Maintain Your Vehicle: Safe driving habits and timely vehicle maintenance can help lower the likelihood of collisions, mechanical issues, or property damage. This minimises the need for claims and helps you maintain a spotless insurance record.

• Renew Your Policy on Time: You forfeit the NCB you have accrued if you do not renew your auto insurance within ninety days of its expiration. Always renew your policy on time to keep the discount.

• Transfer NCB When Changing Cars or Insurers: The NCB is linked to the policyholder instead of the vehicle. Make sure you get your NCB certificate and have it transferred if you change insurers or purchase a new car so you can keep receiving the benefit.

• Keep Proof of Claim-Free Record: Keep records or ask your insurer for an NCB certificate when necessary. This is extremely beneficial when applying for NCB retention or changing insurers.

The NCB is a rewarding feature that promotes safe driving and gradually lowers car insurance premiums. Policyholders can experience significant premium savings by comprehending how it operates and employing easy techniques to optimise it.

Maintaining your NCB can have a significant impact on your policy renewal, insurance switch, or new car purchase by reducing the cost of car insurance and ultimately increasing the cost-effectiveness of ownership.