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How a No Claim Bonus Impacts Your Car Insurance Premium Calculation
[Posted by: InsuringIndia Blog on 12-Feb-2016]

In these times if mounting traffic snarls and higher risk of major and minor road accidents, if you've managed to avoid even a single scrape on your car and been a careful driver, then there's a big advantage for you in the form of a 'No Claim Bonus.'


What is an NCB?


As the term suggests, an NCB is essentially a benefit that a car owner is eligible to avail from an insurance company if he has not made any insurance claim within the policy term. This advantage is available on renewal of policy. By not claiming insurance for a year, you can have a discount ranging from 20% -50% which is spread over six years, and then remains constant after that. This directly reduces the premium cost for the forthcoming year.


What's important here is that an NCB revolves around the policy holder and not his vehicle. This means even if you changed your vehicle, you’re still eligible to claim an NCB provided you've fulfilled its basic criteria. 


What you need to know about NCB 


Under the Motor Vehicle Act 1988, car insurance is mandatory in India and it covers third party liability. There are two types of vehicle insurance policies: Third Party Insurance (Act only Policy) & Comprehensive Policy. The former covers only liability of the vehicle owner for loss or damage to life or property of third parties whereas comprehensive insurance policy covers in addition to third party liability, loss or damage to the vehicle itself by way of accident, theft, etc. Comprehensive insurance is referred to as 'Own Damage Policy' and focuses on loss or damage to the vehicle. Both policy types of policy offer NCB. 


How does the premium calculation work in a NCB?


Since the first year doesn't count, this discount in the premium is usually 20% for the second year, 25% for the third year, 35% for the fourth year, 45% for the fifth year and 50% for the sixth year. The NCB remains constant at 50% for every subsequently. The value of the discount depends upon the insurance claims you have made in that particular year. You lose this benefit as soon as you make a claim.




Things to remember about NCB


·        If you renew your policy only then can you be given an NCB.


·        In an NCB the vehicle owner is pivotal, not the vehicle. This means if you've sold your previous car without any claim and bought a new one, you can still claim an NCB based on your previous blemish free record.


·        NCB is valid even if you're changing your insurance company. But you need to have all your documents in order from your previous insurer which includes a letter highlighting number of years through which a no claim discount is valid & expiry date of previous policy. 


·        NCB is terminated if policy is not renewed within 90 days from date of expiry of your existing policy.


Before opting for any type of car insurance policy, take into consideration the various types of policies which are available through online portals and compare quotes. Pay special attention to the features of the policy, additional riders and the cost. Thereafter, draw up a list of advantages and disadvantages and choose the policy that gives you maximum support in terms of best and comprehensive accidental coverage at the lowest premium rates. You can, subsequently, fill up the form and make an online payment. On realization of your payment, the policy will be confirmed within a matter of a few minutes. All this can be done at your convenience from anywhere.   

Get Free Comparison and Quotes of the Best Term Plan in India. 

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*This is based on the difference between the highest and lowest premium's for a single person, age 25, looking for an individual health policy with the sum insured of Rs. 5 lakhs.
**This is based on the difference between the highest and lowest premium's for a single person, age 25, looking for a term plan, with the sum insured of Rs. 30 lakhs, and the premium paying term of 30 years.
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