Sunday, January 1, 2017

What Is A No-Claim Bonus And How Can You Benefit From It?

A no-claims bonus can shave a significant amount off your premium. If you make a claim on your policy where your insurer pays out, you’ll generally lose some, or all, of your no-claims bonus. Most policyholders are familiar with the broad concept of NCB but often they do not understand the finer details. 

Here we shed light on the key aspects of NCB available on renewal of policy.

In broad terms, No Claim Bonus, is the insurer's incentive to the policyholder for not making a claim in the preceding years. That is, NCB ­ which is a discount ranging from 20­50% on premium payable cannot be claimed as a right but has to be earned by maintaining a claim­free record. 

When you buy your first comprehensive motor insurance policy, you are normally (except in the rare case of NCB transfer) not eligible for any NCB discount on the 

premium paid because you have no claim­free record as such. You can claim a starting NCB of 20% on the first renewal of the policy provided there has been no claim during the past year. 

This discount increases steadily with every claim free year up to a maximum of 50% at the end of five claim free years. NCB belongs to you, not your car. This is the key feature of NCB ­Therefore, you get to retain your NCB if you replace your existing car with a new one or if you switch to another insurer at the time of renewal of the policy. 

NCB transfer is no rocket science: Assume you had purchased a car in 2010, which was then sold in 2015 on or after the 5 policy anniversary. If you never made a claim during the period, you would have earned an NCB discount of 50%. Now, suppose you bought a new car in 2015 and the premium for this car's policy was Rs 18,000 (excluding service tax), out of which Rs 15,000 is the premium for the own damage component. You can transfer the NCB earned on the previous car policy to the new car policy and claim the NCB discount on the first premium payable for the new policy. 

But a person ­to ­person transfer is not allowed, except to the legal heir in case he/she inherits the car on the policyholder's death. 

Transferring NCB is a simple procedure. You have to submit forms 29, 30 (buyer­seller agreement form) along with the letter requesting for transfer of NCB to your existing insurer. Next, the insurer has to issue an NCB certificate, which is valid for three years and you need to submit it to your new insurer.

If you are switching to a new insurer at the time of policy renewal for your existing car, you only need your last year's policy document or renewal notice that mentions the NCB you are eligible for.

Do note the NCB discount is applicable only to the own damage premium component and not the third party liability premium, which constitutes 15­20% of the total premium. If you have only third party car insurance no NCB is earned irrespective of the number of years the policy has been renewed and whether any claims have been made or not.

It is recommended that you do not make a claim for very minor damages keeping the NCB benefits in mind.

You lose NCB even when you make a very small claim. You can safeguard your NCB with a protect add­on cover which is subject to certain restrictions.

The maximum NCB policyholders are entitled to is 50%.

For more information on NCB or to get an instant quote or to speak with an insurance expert, click here or call 9003022252.


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