Guide on No Claim Bonus in Insurance: Everything You Need to Know

Insurance policies charge you a premium for covering your financial risks. If the risks occur and you incur a financial loss, the company pays you compensation for the loss that you have suffered. But what if you don’t suffer any loss?

Under general insurance policies, specifically motor insurance and health insurance, if you do not make a claim in a policy year, the policy rewards you in the form of no claim bonus. Let’s understand the concept of no claim bonus, its features and other important aspects

What is NCB?

No claim bonus, or NCB as it is popularly called, is a bonus which is allowed under health and motor insurance policies if you do not make a claim during the coverage period. This bonus either gives you a premium discount when the policy is renewed or it increases the coverage level without changing the premium. Moreover, the bonus is cumulative in nature and it increases after every successive claim-free year.

No claim bonus is available in both motor insurance and health insurance plans. However, under each plan, the bonus differs. So, let’s have a look at both these plans and their respective NCBs.

NCB in health insurance

In a health insurance policy, no claim bonus can be awarded in any of the following three ways –

• Increase in the sum insured when the plan is renewed
• Discount in the premium when the plan is renewed
• Discount vouchers of wellness-related products

Usually, the sum insured is allowed to increase in most health insurance plans while in others a premium discount is allowed. The third mode of no claim bonus is found only in a few health insurance plans.

Features of NCB in health insurance

1. In the case of the increasing sum insured, the sum insured increases by 5% to 50% depending on the policy that you choose
2. The increase is cumulative in nature
3. The increase in the sum insured is usually allowed up to a specified limit
4. In the case of premium discounts, discounts of 5% or 10% is allowed in the renewal premium
5. If a claim occurs, the no claim bonus is reduced by a specified percentage and no bonus is allowed in the year of claim
6. When you port your policy to another insurance company, you can carry forward your accumulated NCB to the new policy if the new insurance company allows.

How does NCB work?

If the NCB allows an increase in the sum insured, after every claim-free year, the sum insured would continue to increase. In case of a claim, the accumulated NCB reduces. Moreover, you don’t get an NCB in the year in which the claim is made. From next year onwards, you can again start earning an NCB if no claims are made under the plan.

For example, if you opt for a sum insured of INR 5 lakhs and the no claim bonus is 10%, the following year, the sum insured would increase to INR 5.5 lakhs. If the maximum increase allowed is 50%, the sum insured would increase by 10% after each successive claim-free year till it reaches INR 7.5 lakhs after 5 claim-free years. Thereafter, even if you don’t make claims, the increase would not be allowed.

Loss of NCB

The NCB earned under health insurance plans is lost if the policy has lapsed and you do not renew the plan within the grace period. Moreover, in the case of porting, the new insurance company might not recognize the NCB accumulated in your previous policy. In that case, in the new policy, your previous NCB would be lost and you would have to start accumulating NCB again.

Top health insurance plans offering the best NCB rates

Here is a list of some of the best health insurance plans which offer the best NCB rates in the market

Name of the policy	NCB allowed
National Mediclaim Policy	5% increase in sum insured up to a maximum increase of 50%
Manipal Cigna Pro-Health Protect	5% increase in sum insured up to a maximum increase of 200%
Religare Care Pan	10% increase in sum insured up to a maximum increase of 50% + No Claim Bonus Super add-on is available where the increase is 50% up to a maximum of 100%
Universal Sompo Complete Healthcare Policy	10% increase in sum insured up to a maximum increase of 50%
Star Family Health Optima Insurance Plan	25% increase in sum insured in the second year and 10% thereafter, up to a maximum increase of 100%
Aditya Birla Activ Assure Diamond Plan	10% increase in sum insured up to a maximum increase of 50%
Apollo Munich Optima Restore Plan	50% increase in sum insured up to a maximum increase of 100%

NCB in Motor Insurance Plans

Under car and bike insurance policies, the no claim bonus is allowed as a reduction in the renewal premium. If you don’t make a claim in the policy year, you get a no claim discount which is applicable when the policy is renewed.

Features of NCB in Motor Insurance Plans

1. The rate of no claim bonus discount has been fixed by the Insurance Regulatory and Development Authority of India (IRDAI)
2. The NCB rate is, therefore, fixed across all car and bike insurance plans offered by every insurance company
3. The rate of NCB increases after each successive claim-free year
4. You can claim an NCB discount of up to 50%
5. The discount would be applicable only in the case of comprehensive motor insurance policies. Third-party plans do not allow any NCB
6. The discount would be levied on the own damage premium of the comprehensive motor insurance policy

Rate of NCB in Motor Insurance Plans

The rate of applicable no claim bonus discount is as follows

Incidence of claims	No claim bonus allowed
No claims in the first policy year	20%
No claims in the two successive policy years	25%
No claims in three successive policy years	35%
No claims in four successive policy years	45%
No claims in five or more successive policy years	50%

The maximum no claim bonus allowed is limited to 50%. Even if you don’t make claims for six or more years, the rate would remain fixed at 50%

How does NCB of Motor Insurance Plans work?

Suppose you buy car insurance plan and pay a premium of INR 15,000. If no claim is made in the first policy year, you earn an NCB of 20%. If the renewal premium is INR 14,000, you would have to pay only INR 11,200. Again in the next year, if no claims are made, the bonus would increase to 25%. If the renewal premium for the third year is INR 12,000, you would have to pay INR 9000 after applying the NCB rate. So, the bonus would keep on increasing until a claim is made.

Transfer of NCB of Motor Insurance Plans:

A unique thing about the no claim bonus in motor insurance policies is that the bonus is easily transferable. Here’s how the transfer of NCB woks

1. If you switch insurance companies when renewing the policy, the NCB of the previous policy would be transferred to the new policy. You would, therefore, get a premium discount even if you change insurers
2. If you are selling your car or bike and buying a new vehicle in its place, the accumulated no claim bonus of the previous motor insurance policy can be transferred to the new policy that you buy. However, keep in mind that the transfer of NCB would be allowed only between policies on the same kind of vehicle. If you sell a bike and buy a car, the NCB of the bike insurance policy cannot be transferred to the new car insurance plan
3. If you sell an existing vehicle and do not buy a new vehicle immediately, you can still retain the NCB of the last policy for a specified time. If you buy a vehicle within the specified time, the retained NCB can be used to claim a premium discount in the new policy

Loss of NCB in Motor Insurance Plans

The accumulated NCB would be lost if there is a claim in any policy year. Moreover, if the coverage has lapsed and you do not renew the policy within 90 days of such lapse, the accumulated NCB would become zero.

Protection of no claim bonus in Motor Insurance Plans

You can take measures to protect the no claim bonus that you accumulate in your motor insurance plan. These measures include the following –

• Avoid making small claims in your motor insurance policy. Pay such claims yourself so that the NCB can be retained
• Always renew the policy on time without fail. If the policy is renewed regularly, the NCB would be preserved
• You can buy the NCB protect add-on which protects the NCB even in case of claims. This add-on is like NCB insurance which protects the NCB even after a claim. You would have to pay an additional premium to buy this add-on with your motor insurance policy.

Top Motor Insurance Plans offering the best NCB rates

All motor insurance policies have the same NCB rates irrespective of the company. So, you can choose any policy and you would get the same rates. However, some of the top motor insurance companies which you can choose from are as follows

• HDFC Ergo General Insurance Company Limited
• Bajaj Allianz General Insurance Company Limited
• New India General Insurance Company Limited
• Magma HDI General Insurance Company Limited
• ICICI Lombard General Insurance Company Limited
• Reliance General Insurance Company Limited
• Go Digit General Insurance Company Limited

So, utilise the no claim bonus if you don’t make a claim under your health or motor insurance policy and get savings in the premiums that you pay.