Introduction
Insurance is an essential tool for financial security, providing protection against unexpected risks. One of the most attractive features of an insurance policy, especially in health and motor insurance, is the No-Claim Bonus (NCB). This bonus is a reward for policyholders who do not file any claims during their policy term. It is a significant incentive that reduces the premium cost and encourages responsible usage of insurance benefits.
In this blog, we will delve into what No-Claim Bonus is, how it works, its benefits, and tips to maximize its advantages while maintaining a legally compliant approach.
What is No-Claim Bonus (NCB)?
A No-Claim Bonus (NCB) is a discount or bonus offered by insurance companies to policyholders who do not make any claims during their policy period. It is primarily applicable in motor insurance and health insurance policies.
- In motor insurance, NCB is a discount on the premium for the following year.
- In health insurance, NCB is usually offered as an increase in the sum insured without additional cost or as a discount on the renewal premium.
NCB serves as an incentive to encourage careful driving, preventive healthcare, and responsible insurance usage.
How No-Claim Bonus Works
In Motor Insurance
- When you purchase a comprehensive car or two-wheeler insurance policy, you pay an annual premium.
- If you do not make any claims during the policy period (usually one year), the insurer rewards you with an NCB.
- The NCB percentage increases with each consecutive claim-free year, up to a maximum limit.
- If a claim is made, the NCB resets to zero.
- NCB can be transferred when switching insurance providers or when purchasing a new vehicle.
No-Claim Bonus Slab for Motor Insurance
| Consecutive Claim-Free Years | NCB Discount on Premium |
|---|---|
| 1 year | 20% |
| 2 years | 25% |
| 3 years | 35% |
| 4 years | 45% |
| 5+ years | 50% |
In Health Insurance
- If no claims are made in a year, the policyholder receives an NCB.
- The bonus is often granted as an increased sum insured without extra cost or as a discount on renewal premium.
- Some insurers provide an additional 5% to 50% coverage increase for every claim-free year.
- If a claim is made, some policies allow partial retention of NCB, while others reset it entirely.
- NCB is applicable only for individual or family floater health insurance plans and not for group health insurance policies.
Example of NCB in Health Insurance
| Claim-Free Years | Sum Insured Bonus Increase |
| 1 year | 10% |
| 2 years | 20% |
| 3 years | 30% |
| 4 years | 40% |
| 5+ years | 50% |
Benefits of No-Claim Bonus
1. Lower Premium Costs
- In motor insurance, a claim-free year results in a reduced premium, making insurance more affordable.
- In health insurance, policyholders may get a discounted renewal premium.
2. Higher Coverage Without Extra Cost
- Health insurance NCB increases the sum insured, allowing better financial security against medical emergencies.
3. Encourages Safe & Responsible Behavior
- In motor insurance, drivers become more cautious to avoid unnecessary claims.
- In health insurance, policyholders prioritize preventive healthcare to avoid medical expenses.
4. Transferable Benefit
- NCB in motor insurance is transferable even if you change your insurer or buy a new vehicle.
- In health insurance, NCB applies when porting policies between insurers, as per regulatory guidelines.
5. Long-Term Financial Savings
- With increasing discounts or coverage bonuses, policyholders save more in the long run while enjoying continuous protection.
Things to Keep in Mind About NCB
1. NCB is Applicable Only for Own Damage (OD) Cover
- In motor insurance, NCB applies only to the own damage portion of the premium, not to third-party insurance.
2. NCB is Not Valid If a Claim is Made
- Any claim, even a minor one, can reset the NCB to zero in motor insurance.
- Some health insurance policies allow partial NCB retention, but this varies by insurer.
3. NCB Cannot Be Transferred to Another Person
- The NCB benefit belongs to the policyholder and is not transferable to another individual, except in cases of nominee transfer due to the policyholder’s death.
4. Timely Policy Renewal is Essential
- NCB remains valid only if the insurance is renewed before its expiry. A lapse in renewal (usually beyond 90 days) results in the loss of accumulated NCB.
5. Zero Depreciation Add-On Does Not Affect NCB
- While a Zero Depreciation Cover ensures higher claim settlements, it does not protect NCB in case of a claim.
How to Maximize No-Claim Bonus
- Avoid Making Small Claims
- If the repair or medical expense is minor, paying out-of-pocket can help retain your NCB and enjoy bigger savings on renewal.
- Choose a Higher Voluntary Deductible
- In motor insurance, opting for a higher voluntary deductible reduces claim probability, keeping NCB intact.
- Install Safety Measures
- For vehicles, installing anti-theft devices lowers risk, reducing the need for claims.
- In health insurance, adopting a healthy lifestyle minimizes medical expenses.
- Opt for NCB Protect Add-On
- Some insurers offer an NCB Protection Rider, allowing a claim while keeping the NCB intact.
- Renew Your Policy on Time
- To ensure NCB continuity, renew policies before they expire, ideally before the grace period ends.
Conclusion
No-Claim Bonus is a valuable incentive that helps policyholders save money and get better benefits in both motor and health insurance policies. Understanding how NCB works, its benefits, and strategies to retain it can lead to significant long-term financial advantages. By making informed decisions, maintaining a claim-free record, and choosing the right add-ons, individuals can maximize the benefits of NCB while ensuring their insurance policies provide the necessary protection when needed.
Before making any insurance-related decision, it is always advisable to read the policy documents carefully and consult a professional if needed to avoid any legal or financial issues in the future.
