What Is NCB In Motor Vehicle Insurance?

Posted on Feb, 2020
What is NCB in motor vehicle insurance?
Buying motor insurance has become mandatory in India and you must have a valid insurance policy if you want to drive on Indian roads. However, most car owners consider buying insurance as an added expense. Those who have existing policies, on which they’ve not filed claims, believe that this expense can be avoided. However, it is always advisable to find a way in which your insurance premiums can be reduced considerably. One simple way to reduce your insurance premium is to encash your no claim bonus. Here is a detailed guide on NCB.

What is NCB in insurance?

NCB full form in insurance stands for a no-claims bonus. A no claims bonus is mainly a reward provided by insurance companies to policyholders for making no claims during the policy term. For instance, if your policy duration is from August 2019 – July 2020 and you do not file any claims in the calendar year, you become eligible for a no claims bonus. The insurance company provides this bonus in the form of a discount on the insurance premium. The NCB thus helps you save a reasonable sum of money on your premium payments every year.

How does NCB work?

What NCB means in insurance? Let’s understand how it works. For every claim-free year, you receive a discount on your insurance premium. The discount percentage increases with every passing, claim-free year. For instance, if you don’t file an insurance claim in the first year of buying the policy, you become eligible for a discount of up to 20%. The discount increases to 25% the following year again if you’ve not filed any claims at all until you can get a 50% discount on insurance premiums for five continuous, claim-free years. The below table can help you understand the NCB discount ratio against the number of claim-free years

Here’s How the NCB discount works


Age of the Car insurance Policy Approximate No claims bonus percentage
After 1 year of no claims 20% off on insurance premiums
After 2 continuous years of no claims 25% off on insurance premiums
After 3 continuous years of no claims 35% off on insurance premiums
After 4 continuous years of no claims 45% off on insurance premiums
After 5 continuous years of no claims 50% off on insurance premiums


Typically, most insurance providers follow the same modus operandi as mentioned above, while offering the NCB insurance benefit.

Example highlighting how NCB works
Here’s an example to help understand how to calculate NCB for car insurance: Let’s say Mr. Kumar owns a Maruti Suzuki SX4 car and has purchased a comprehensive car insurance policy for which he is charged and an annual insurance premium of ₹20,000. Mr. Kumar is a safe driver, and he has not filed any insurance claims in the first year since purchasing the policy. In this case, his insurance provider will offer him an annual discount of 20% on his insurance premium. He will thus need to pay a reduced insurance premium of ₹16,000 if he renews his insurance policy before the expiration date. In the following years, his premium reduces further, until he becomes eligible for a maximum discount of 50% on insurance premiums, having to pay ₹10,000 only. He can avail this discount despite the fact that the market value of his car steadily depreciates with every passing year. However, to avail this maximum discount, he must ensure that he does not file any claims for five consecutive years.

Essential facts you should know about NCB

Now that you understand what NCB means in insurance, let us take a look at some of the crucial facts surrounding this benefit.

1. The NCB discount applies to the policyholder and not the vehicle insured

The NCB benefit is essentially a reward offered to policyholders for not enchasing their insurance policies. This is why the discount is also applicable to the policyholder and not to the vehicle per se. As such, if you decide to sell your old car and purchase a new one, you can transfer the NCB to your new vehicle. So long as you are listed as the owner of the new car, you can transfer the NCB to your new vehicle and avail the discounts that go with it.

2. Transfers are valid even if you choose a new insurance provider

When you buy a new car, you have the option of changing your insurance provider without forfeiting your bonus. So, if you wish to port your insurance policy, you can do so easily. Just get in touch with the insurance provider to check the procedure for transferring the plan and the accumulated no-claims bonus. However, you need to provide proof to the new insurance provider that you have not filed any claims, and your existing provider can help you with the same.

3. You can avail the NCB upon policy renewal

The insurance company sends you written correspondence when your insurance policy is due for renewal. In this document, they will mention the terms of renewal and the no-claim bonus that you can get upon renewing the policy. The discount is valid only upon renewal and therefore, you will not be eligible to claim it mid-way through your policy.

4. You cannot claim NCB benefits in a third-party insurance policy

Another noteworthy fact to remember is that NCB benefits are not provided on the third-party limited liability insurance policies, primarily because the premiums charged against third party policies are already significantly low. This benefit is only provided to policyholders who have invested in comprehensive policies, collision polices or own damage policies.

5. You cannot avail NCB benefits if you do not renew your policy on time

To avail the NCB insurance, it is necessary to ensure that you renew your insurance policy before it expires – typically 30 to 45 days before the policy expiration date. If you are unable to renew the policy before expiration, you will have to forfeit the no-claim bonus, completely, irrespective of how much you have accumulated. Moreover, you also have to pay a fine or penalty if you decide to renew the same insurance policy, after it has lapsed.

The no-claim bonus is indeed a great facility through which you can steadily reduce your payable insurance premiums. Not only does it promote massive savings, but it also encourages car owners to practice safe driving. At PINC Insurance, our team helps you with all your insurance needs – from buying the right policy as per your budget to filing claims and checking your no-claims bonus eligibility.