How is NCB Calculated in Vehicle Insurance?

No Claim Bonus (NCB) is a reward offered by insurers for not making any claims during a policy year. It is usually provided as a discount on the Own Damage premium when a comprehensive motor insurance policy is renewed.

This discount applies only to the Own Damage portion of the policy and not to the mandatory third-party premium, as third-party rates are regulated separately.

One of the useful features of NCB is that it is generally linked to the policyholder rather than the vehicle. This means it can usually be transferred to a new vehicle, subject to the insurer’s terms and process.

Over time, a good No Claim Bonus can lead to noticeable savings on insurance premiums. This makes it a valuable benefit for careful drivers who maintain a claim-free record.

Most insurers in India follow standard No Claim Bonus slabs based on consecutive claim-free years.

The following table illustrates the typical no-claim bonus percentage structure:

The percentage increases gradually as long as no claims are made during the policy term.

For example, a driver who completes three consecutive years without filing a claim may receive a 35% discount on the Own Damage premium at renewal.

After five years without any claims, you usually reach the maximum NCB level of 50%.

It’s important to remember that your bonus only increases if your claim-free years are consecutive. Making a claim can affect your NCB, depending on the type of claim and your policy rules.

Because the discount can eventually reach half of the Own Damage premium, maintaining a clean claims record often results in meaningful long-term savings.

Understanding how to calculate NCB in car insurance is relatively simple once you know the applicable discount percentage.

No Claim Bonus is calculated as a percentage of the Own Damage premium in your vehicle insurance policy. The percentage depends on the number of consecutive claim-free years completed by the policyholder.

The easiest way to check your No Claim Bonus is by reviewing your existing policy document during the renewal notice, where the applicable NCB percentage is usually mentioned.

Formula:

To calculate the No Claim Bonus, multiply the Own Damage premium by the NCB percentage applicable to your policy.

NCB Discount = Own Damage Premium × Applicable NCB Percentage

So, if OD premium = ₹10,000 and NCB = 25%, then discount = ₹2,500. 

A practical example makes the process easier to understand.

Imagine that Rahul purchases a comprehensive motor insurance policy in 2022.

*Subject to applicable regulations and policy terms, Rahul may receive the maximum No Claim Bonus of 50% after five consecutive claim-free years.

This example highlights how cumulative NCB benefits can help reduce insurance costs over time.

The longer a policyholder goes without making a claim, the more rewarding the savings on renewal premiums can be.

Although NCB is valuable, it is not permanent.

Certain situations may result in the reduction or loss of accumulated benefits.

• Filing an Own Damage Claim

In many cases, making an Own Damage claim during the policy period may reset your NCB. The exact impact depends on insurer rules and available add-ons.

• Failure to Renew on Time

NCB generally remains valid only if the policy is renewed within the prescribed period. Allowing coverage to lapse for an extended period may result in losing accumulated benefits.

• Incorrect Declaration

If you give incorrect information about your previous NCB when changing insurers, you could lose your benefits and face policy issues.

• Policy Cancellation

Some policy cancellations can affect your NCB eligibility.

• Not Using NCB Transfer Facilities

When purchasing a new vehicle, failing to complete the transfer process correctly could result in the loss of accumulated discounts.

Because NCB can represent significant future savings, it is important to understand the circumstances that may affect eligibility.

Some insurers offer an NCB Protect or NCB retention add-on*.

This optional rider helps policyholders retain their No Claim Bonus even if a limited number of claims are made during the policy period.

The exact terms vary between insurers. Some plans may allow one claim, while others may permit multiple claims under specified conditions.

Because the add-on* provides additional protection, it usually increases the premium slightly.

However, many policyholders consider the extra cost worthwhile because it protects years of accumulated discounts.

For drivers with high NCB levels, preserving a 50% discount can often justify the additional premium charged for the rider.

^{*Add-ons are subject to payment of additional premium. For more details, please refer to the policy wordings and prospectus before concluding the sales.}

No Claim Bonus is one of the best rewards for motor insurance policyholders. If you keep a claim-free record, you can increase your discount from 20% up to 50%, leading to real long-term savings.

Knowing how NCB works, when you can transfer it, and what can affect your eligibility helps you make better choices when renewing your policy.

When you look at insurance options, consider companies like SBI General Insurance. They offer a range of motor insurance plans to help protect your vehicle and your finances.

1. What is a no-claim bonus in car insurance?

No Claim Bonus is a discount offered by insurers to policyholders who do not make any claims during a policy year. The discount is applied to the Own Damage premium during renewal.

2. How much NCB can I get on car insurance?

Most insurers offer NCB ranging from 20% after one claim-free year to a maximum of 50% after five consecutive claim-free years.

3. Does NCB transfer to a new car?

Yes. Since NCB belongs to the policyholder rather than the vehicle, it can generally be transferred to a new vehicle by following the insurer's transfer procedure.

4. Will NCB expire if I do not renew insurance?

NCB may lapse if the policy is not renewed within the permitted period specified by the insurer.

5. How is the NCB percentage calculated?

The percentage depends on the number of consecutive claim-free years completed by the policyholder. Higher claim-free periods result in larger discounts at renewal.