What Is NCB In Car Insurance And How Does It Work?

A non claims bonus (NCB) refers to a decrease in your premium costs if you don’t register claims within the duration of the policy tenure. If you have been a decent driver and are always able to avoid claims and accidents, you are awarded an NCB in your car insurance. In fact, insurance providers offer rewards to individuals with excellent driving records. 

How Does NCB in Car Insurance work?

As prices continuously increase, car insurance helps by offering annual reductions in premiums, thanks to the NCB. It accumulates every claim-free period, allowing you to get a substantial 20% to 50% discount provided you don’t turn in claims for consecutive years. 

An NCB basically operates through a tiered system. This means that the bonus increases the longer a driver is able to drive free of claims. As a result, the amount of premiums you need to pay is significantly reduced.

You begin by obtaining a 20% discount if you haven’t raised a claim during your first policy year. Following this process, you’ll get a constant 5% additional increase in the discount in your second year of not making claims. For the fifth year, you’ll find yourself enjoying a 50% discount as long as you’re claim-free. In a nutshell, good drivers are more likely to optimize discounts and car protection in the long run.

Since claims generally cost insurance carriers money and time, an NCB is also a great way to reward drivers who manage to maintain a clean driving record. However, it can be terminated when there is a failure to renew the policy within a time frame of 90 days from its existing expiry date and if a claim has been raised during a policy year. 

An NCB protector cover may also be necessary to ensure that the bonus won’t be reset for an important claim.

NCB Protection

You can protect your NCB by paying an additional premium. This way, the policyholder can protect his NCB even though there’s a need for a claim. Having an NCB Protector allows you to reap the benefits of an NCB instead of losing it altogether.

The expense won’t be the discount that you can access after a five-year-long duration free of claims, despite how there may be certain points about how you can utilize the insurance frequently. Besides, having two or more claims may still cause a significant impact nonetheless. Paying for an NCB Protection, however, won’t keep the policy costs from increasing over the years. 

When are NCB protectors not necessary?

With insurance policies, reading the fine print is imperative to determine certain clauses that won’t be covered. There are some cases you need to keep in mind where an NCB Protector won’t be applicable. 

• The car insurance policy should be renewed within 90 days; otherwise, the NCB will reset to 0%. 
• The car should be repaired in an authorized or network garage.
• Exceeding the allowable number of claims under the NCB Protector will render the policyholder ineligible for an NCB. 
• Fraudulent claims and misconstruing of facts about a claim will be subject to an NCB cancellation. 
• Most insurers don’t permit mid-term removal or inclusion of the NCB protector. 

It’s important to remember that the extent of benefits or coverage widely differs from one insurer to another. That said, you need to weigh various policies before immediately deciding on your insurance. For good measure, you can compare different policies thoroughly so you’ll secure the best deals and protection. 

Benefits of an NCB 

Car owners can enjoy several perks with an NCB in their car insurance policy. Here are some of them: 

Bigger Savings 

The percentage of your NCB gradually increases as long as you follow the established rules. Drivers who aren’t able to raise claims for a consecutive five years are most likely to acquire bigger premium discounts every policy renewal. 

Positive Rewards 

As mentioned, an NCB basically poses as a reward given to responsible drivers for how they’re able to maintain their insured car’s good condition. In this case, the policyholder earns rewards via NCB by not turning in claims during the former policy tenure period. 

Reduced Premiums

With an NCB, you get to earn approximately 20% to 50% on your car insurance premium. The percentage of the discount is granted to policyholders every claim-free year, which can then help decrease the amount of the premium you’re supposed to pay when it’s time to renew.

Hassle-Free Transfer to Another Insurer or Car

One of the benefits of an NCB is that it’s conveniently transferable to another car should the policyholder decide to switch vehicles. Besides this, it also lets you switch insurers if you decide to purchase insurance from a new company altogether.

Offered to Policyholders, not Cars

It’s worth noting that NCBs are granted to the car owner/policyholder instead of the vehicle itself. This means that when someone sells an insured car or purchases a new one, the NCB will still be there, given that the car owner continuously renews car insurance policies. Moreover, it can’t be transferred to new vehicle owners. 

Things to Consider with an NCB

1. NCB does not apply to third-party covers

NCB is a benefit that only comes with the own damage premium instead of the third-party liability premium, which comprises around 15-20% of the overall premium. This means that you won’t be able to avail an NCB discount if you only have third-party insurance or add-ons. You won’t get to earn an NCB regardless of the years your policy has been renewed or if there are claims. 

Also, dropping an irrelevant add-on cover won’t affect your accumulated NCB at the time of policy renewal. However, you can consider the NCB Protector add-on, which helps protect your benefits in case a necessary claim has to be made. 

2. An NCB discount is only available during policy renewals

When you purchase your first comprehensive policy, you usually won’t be eligible for a discount on the premium yet since you have no existing claim-free record at that point. You can only avail of an NCB starting at a 20% discount on your first policy renewal, only if there hasn’t been any claim for the previous year. Eventually, this discount only grows every year free of claim where you can obtain as high as a 50% discount on your premiums. 

3. Transferring NCBs adheres to a simple procedure

To transfer your NCBs, you’ll need to follow an easy procedure when buying a new car or selling your old one. You’ll need to submit certain forms alongside a letter of NCB transfer to your current insurer. Afterward, the insurer will provide you with an NCB certificate that has a validity of three years, which you’ll need to turn in to your new insurer. 

Suppose you decide to transfer to a new insurance provider when you’re about to renew your policy. In that case, you’ll only be needing the renewal notice or policy document from last year, which sufficiently mentions your eligibility for the NCB. 

On the other hand, if you’re purchasing the policy online, there usually won’t be a need to submit the certificate since the NCB will be relayed depending on your declaration. Even so, this doesn’t give you a pass to retract a previously-made claim to the avail of an NCB since your new provider can verify this information with your former insurer. 

4. Making small claims can result in even bigger losses

It can be quite tempting to submit a claim whenever your vehicle suffers minor damage every once in a while. But before you instantly do anything, it’s wise to consider the cost-benefit analysis and think of the possible consequences. This is due to the fact that NCB most often resets back to zero, even in cases of small claims. 

If you’ve been involved in a minor accident, it’s best to skip the claim and pay for the necessary repairs yourself instead of using your car insurance on it. This lets you go an entire year without any claims, consequently letting you obtain an NCB when renewal time comes. It would be a waste to see your accumulated NCB decrease just because of a minor claim. It’s also important to factor in your current circumstances so you can determine whether or not it’s the best decision to forgo a claim or proceed with it.

5. NCB belongs to the insured, not the vehicle

One of the best features of a No Claim bonus is that it’s linked to the insured instead of the car. This means that you’re allowed to keep your NCB even if you decide to replace your current vehicle with a new one or if you suddenly decide to switch to a new insurance provider. 

Suppose you had bought a car in 2008 which was sold on or after the fifth anniversary of your policy. If you’ve managed to reach the 5th year without any claims, you’re entitled to a 50% NCB discount. Even if you do buy a new car in the same year, you can easily transfer your accumulated NCB to this new car’s policy and then claim the discount on your first payable.