All you need to know about no claim bonus on car insurance

We Indians love a good deal. Be it waiting for the end-of-the-season “sales” on our favourite apparel brands, or eyeing that extra free 2GB data option for our mobile internet plan, we really are a value-for-money lot when it comes to making most purchase decisions.

Now what if CarToq told you that you can reduce the premium payout for your car insurance policy by between 20% and 50% each year! Sounds too good to be true? Not quite. Also read: All you wanted to know about third party car insurance

All you need to know about no claim bonus on car insurance

No claim bonus

If you have a comprehensive car insurance plan, and have made no claim during a policy year, then the insurer–at the time of renewing the policy–will give you a discount on the portion of the overall premium that covers damages to the vehicle. Also read: How to calculate your car insurance premium

So while the premium component covering third party liability will remain fixed, you will receive a discount–known as “no claim bonus” (NCB)–on the portion relating to “Own Damage” (damages to your car).

With every claims-free policy year, you will get a bigger discount (as shown in the following table) –

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Here is an example of the significant savings you can make on the renewal premiums if you maintain a zero-claims record

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*IDV (Insured’s Declared Value) is the amount the insurance company will pay you if your vehicle is damaged beyond repair or stolen–it keeps declining every year, based on the depreciation of your car.

NCB belongs to you–and not the car

It’s important to remember that the bonus keeps getting added against your name–and not the specific car you currently own–with every passing policy year. Therefore, if and when you sell or exchange a car, you can transfer any accumulated bonus to the insurance policy for your new vehicle, and enjoy lower premiums. Also read: 5 tips to reduce car insurance premium


You can transfer the discount only if the new car you are going to use is of the same class as your previous vehicle. So for instance, if you had a car whose engine capacity was less than 1,000 cc, and are now upgrading to a 1,500 cc model, then your discount would not help you get a reduced premium. Also read: 6 key top-up covers for car insurance

Also keep in mind that the insurer will terminate, i.e. cancel, all your accrued bonuses if you fail to renew the existing policy within 90 days from date of expiry of the policy.

Nevertheless, the promise of NCB should serve as an incentive for you to be a good driver, and to steer clear of accidents. Also read: Why the insured declared value on your car is important

Avoid making smaller claims to earn bigger discounts

While you might be tempted to get everything and anything reimbursed from the insurer, it would be better if you bear the expenses for fixing minor car-related issues. It does not make sense to make a claim if the given amount is lower than the bonus you could accumulate by maintaining a zero-claims record. Having higher bonuses in your balance will help you get a far reduced premium when you buy a new car!  Also read: Seven basic things about car insurance