In India, the No Claim Bonus (NCB) is like a golden ticket, rewarding you for being a responsible and cautious driver. It accumulates every claim-free year, helps to reduce your premium costs and eases your financial burden. However, like all good things, it's essential to know that the NCB isn't invincible. There are certain conditions under which its protection might be put to a test – yes, a few conditions might even lead to its termination!
Navigating through the intricacies of car insurance in India, you must be aware of the specific situations that can jeopardise your hard-earned NCB. This article explores different scenarios about how your NCB can be terminated while highlighting beneficial ways to help you proactively protect the accumulated bonus.
First things first – let’s understand what NCB means in motor insurance, be it for a car or a bike.
What is No Claim Bonus (NCB)?
For every year that you go without making any claims on your car insurance policy, you earn an NCB for that year. The longer you drive without making claims, the bigger the bonus gets. You can utilise this accumulated bonus at the time of renewal to lower your premium costs. Simply put, it boosts your confidence and your savings.
Typically, NCB starts at 20% of the premium for the first claim-free year. For each subsequent claim-free year, the NCB percentage increases, up to a maximum of 50% after five consecutive claim-free years.
If it is not already clear, know that your NCB will reset back to zero immediately after you make a claim. This means you will lose the accumulated NCB percentage and start again from 20% in the next policy term.
Now, let’s get back to our main focus here – which is understanding the grounds for having your NCB benefits revoked by your insurance provider.
What are the conditions under which NCB can be terminated?
Here are some key conditions under which NCB may be terminated in motor insurance:
Making a Claim during Policy Term: The primary purpose of NCB is to reward you for not filing any claims. Once a claim is made, even if it is a minor one, the NCB for the subsequent policy period may be affected. The impact on NCB varies depending on the insurance company's terms and conditions. Some insurers may reduce the NCB percentage, while others may reset it to zero.
Unclaimed NCB within Grace Period: NCB is valid only when you renew your insurance policy on time. If you fail to renew it within 90 days of its expiry, you will lose the unclaimed NCB. You may also choose to transfer your unclaimed NCB to a different insurer, but this does not impact the accumulated NCB if it is done within the stipulated timeline.
NCB Transfer on New Purchase: NCB transfer applies when you purchase a new vehicle and you want to use it to get lower premiums on the insurance for the new vehicle. However, this is only applicable if the new car belongs to a similar class. In case it’s an upgrade, you may have to purchase a fresh policy, pay for the difference in tariff, or lose out on the accumulated bonus.
NCB transfer on Owner’s Death: NCB cannot be transferred from one person to another. However, in case of the owner’s death, it can be transferred to the next legal heir of the vehicle provided it is done within 90 days. Failure to comply can lead to the NCB being terminated.
Policyholder's Fault in an Accident: If a policyholder is involved in an accident and found to be at fault, it may lead to the termination of NCB. Insurers consider fault determination when calculating the NCB for the next policy period.
Total Loss and Vehicle Theft: In unfortunate events where your vehicle is declared a total loss or gets stolen, your NCB will be impacted.
Cancelling Policy Before Its Term: Cancelling your insurance policy before its term concludes can lead to the termination of your NCB. This is why it is advisable to stay committed to your policy for the entire duration to enjoy the full benefits of NCB.
Declaring Incorrect NCB: Insurance providers validate the authenticity of the information provided by you. If they find misrepresentation regarding the NCB that you are eligible for, they may first request you to pay the difference amount. Failing to do so on your part, may lead to the NCB being terminated.
Now that you know the grounds for termination of NCB, here are some protective measures you can undertake.
How to protect your NCB on car and bike insurance?
To protect your NCB, you can opt for an NCB protector add-on, also known as an NCB retention add-on. NCB protector add-on is an optional feature that you can purchase along with your standard comprehensive car or bike insurance policy.
When you buy the NCB protector add-on, it allows you to retain your NCB even if you claim during the policy period, up to a certain limit. This helps you maintain the NCB discount on your future policy renewals.
The NCB protector add-on usually increases the premium slightly, but it can be worthwhile if you want to safeguard your NCB and continue enjoying the benefits of a reduced premium in the following years.
What are some limitations of NCB in car or bike insurance?
NCB applies only to Comprehensive insurance policies and not Third-Party Liability plans. Third-Party policies are mandated under the Motor Vehicle Act, but they do not provide NCB benefits.
NCB is non-transferable between individuals. If you sell your vehicle to someone else, your NCB cannot be transferred to the new owner.
Commercial vehicles do not qualify for NCB benefits. NCB applies solely to private vehicles. It encourages safe and responsible driving practices for personal use.
The terms and conditions for NCB in the case of commercial vehicles may vary across insurers. It is recommended to refer to the policy document for specific details.
Conclusion
By staying vigilant and avoiding multiple claims within a policy period, you can protect your NCB benefits and enjoy significant savings on future premiums. Additionally, maintaining continuous coverage without any lapses ensures that your efforts to drive safely are duly recognised and rewarded. Embrace these principles to not only secure your financial interests but also foster safer roads for yourself and others. Stay informed, drive responsibly, and reap the full benefits of your car insurance NCB.
