What is no claim bonus in car insurance

Car insurance is an essential and mandatory investment every car owner must make as it protects the vehicle by covering the damages caused due to accidents, theft, fire etc.

When you purchase car insurance, you pay for the premium, and in return, the insurance company bears the expenses from damage repair to the vehicle as per the policy coverage. Although, the policyholder needs to put a claim in order to receive financial support as per the terms and conditions of the insurance policy.

Car insurance companies offer a unique benefit where policyholders are rewarded for not making a claim in the preceding years, which is called No-Claim Bonus (NCB). NCB is basically a discount provided by the insurance company on the insurance premium that you can avail while renewing your policy for another year. If you do not make any claims for five consecutive years, you can accumulate a maximum of 50% discount on premiums.

NCB can be an attractive point while purchasing a car insurance policy, yet, many policyholders may fail to understand the nitty-gritty of NCB, which may result in not obtaining the full benefit of NCB due to lack of information.

Let’s look at some of the important things about the No Claim Bonus:

There is no NCB on third party cover.

One of the crucial things to understand about NCB is that it is only applicable on the own damage cover and premium. You cannot avail of NCB benefits on only a third-party liability premium and cover. Simply, NCB is not available on third-party only insurance for cars. For example, if you buy only a third-party car insurance policy, you won't be able to get NCB, irrespective of the number of years the policy has been renewed and whether any claims have been made or not.

It is only available on policy renewal.

No Claim Bonus is a reward policyholder gets for not making a claim in a policy year. NCB can only be earned by maintaining a claim-free record for a policy year. You don't get NCB benefits at the beginning of the policy year when you buy the comprehensive car insurance policy. You can only claim a starting NCB of 20% on the first renewal of the policy, given there has been no claim during the past year.

NCB is connected to you and not your car

One of the key factors to remember about NCB is that it relates to you as a policyholder and not with the vehicle. Hence, even if you sell your existing car, and purchase another one, while not making any claims during that period, you get to retain your NCB and carry it forward. In case of switching to another insurer at the time of renewal of the policy, the NCB benefits get carried forward as well.

Making small claims may not be a good idea

You can refrain from making claims every time your car suffers minor damage, as it might save you or benefit you more in a long run. How? Sometimes the amount of NCB benefits you may receive after a claim-free year can surpass the cost of the minor repairs. To check the same, it is advisable to carry out a cost-benefit analysis, as, even if you make a small claim, your NCB can go back to zero. Hopefully, the above points may give you the much-needed information about NCB and the various factors affecting it, so that you can use it efficiently to your benefit.

Zurich Kotak General Insurance offers you various car insurance products and services to protect yourself and your car from the burden of financial loss and damages and fulfil all your car insurance needs.

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