No Claim Bonus in Vehicle Insurance — How It Works

No Claim Bonus (NCB) is a reward from your insurer for not making any claims during a policy year. It manifests as a discount on your renewal premium that increases each consecutive claim-free year, going from 20% in the first year up to a maximum of 50% after five claim-free years. Understanding NCB can significantly reduce your insurance costs over time and is one of the most overlooked benefits of careful driving.

How NCB Accumulates

NCB is calculated as a percentage discount on the Own Damage (OD) premium of your comprehensive policy. It does not apply to the third-party premium component. The discount increases progressively with each claim-free year as prescribed by IRDAI.

• After 1 claim-free year — 20% discount on OD premium
• After 2 consecutive claim-free years — 25% discount
• After 3 consecutive claim-free years — 35% discount
• After 4 consecutive claim-free years — 45% discount
• After 5 consecutive claim-free years — 50% discount (maximum)

How NCB Is Lost or Reset

If you make even a single claim during a policy year, your accumulated NCB resets to zero at the next renewal. This is why many vehicle owners prefer to pay for minor repairs out of pocket rather than filing a claim and losing their NCB discount. For example, if your OD premium is ₹15,000 and you have 50% NCB, you save ₹7,500 per year. A claim for a ₹5,000 repair would cost you more in lost NCB than the repair itself.

NCB is also lost if you do not renew your policy within 90 days of expiry. If the gap exceeds 90 days, you start from zero NCB regardless of how many claim-free years you had accumulated.

NCB Protection Add-On

Some insurers offer an NCB Protection add-on that allows you to make one claim during the year without losing your NCB. This is particularly useful for drivers in high-traffic cities or those who want the peace of mind of claiming without penalty. The add-on typically costs 5-10% of the OD premium and is available from most major insurers.

Transferring NCB Between Insurers and Vehicles

NCB belongs to the policyholder, not the vehicle. This means you can transfer your NCB when switching insurers or when you sell your vehicle and buy a new one. You will need to provide the previous policy document and an NCB declaration to the new insurer. Some insurers verify NCB through the Insurance Information Bureau (IIB) database.

NCB Discount Impact on Premium

Frequently Asked Questions

Conclusion

No Claim Bonus is a significant financial incentive for safe driving and careful claim management. Over five years, it can cut your OD premium in half. Protect your NCB by avoiding frivolous claims, renew on time, and consider the NCB Protection add-on if you want the flexibility to claim without penalty. It is one of the simplest ways to reduce your vehicle insurance costs year after year.