When you buy a car, convenience is not the only thing that it adds to your life. It also adds a great responsibility. In addition to ensuring proper maintenance of the vehicle, you also have to ensure your car is under a valid car insurance policy. This means that you buy car insurance online, track its validity, and pay the premium when required to keep the policy active. This applies to both components of car insurance known as third-party liability coverage and own-damage repair coverage. While the former covers any damage or injury caused to a third party in the event of an accident, the latter insures you against the damage to your car. Depending on the coverage you purchased, this holistic coverage for your car can cost a lot of money. Hence, policyholders often wonder if there is any way to reduce the financial burden of having car insurance.
When it comes to third-party liability coverage, the premium is fixed, and the cover is mandatory. Hence, there is no way to lower that component of the premium. This means that you can only reduce your premium by managing your own damage coverage. This can only happen when you understand the factors associated with it. The best example of that is NCB.
What is NCB?
Also known as no claim bonus, NCB is an add-on and essentially a way for the insurance company to reward a policyholder for not making any claims during the policy year. This reward is in the form of a discount on the premium for the next policy year. NCB can offer you a discount between 20% and 50% of the total premium after you renew the policy at the end of a claim-less year. The NCB discount is given on the amount of premium at the time of renewal. Moreover, this discount is transferable, which means it can be transferred from an old vehicle to a newer one.
How does NCB work?
The discount that you would receive through no claim bonus is applicable only from the second year of the policy term. After you have completed the first year and made no claims through calls, emails, or a car insurance app, your insurance provider will offer you a 20% discount on the premium amount. This percentage grows the more years you go without making a claim. You will start receiving the benefits from the second year and can grow up to a certain limit set by the insurance provider. Generally, the maximum discount that insurance providers offer their policyholders is 50% of the premium. However, this depends on the insurance company.
The only scenarios that you would not receive the benefits of the no claim bonus feature are:
- If the NCB benefit is terminated by your request.
- You make a claim.
- If the policy is not renewed until after 90 days of expiration.
No claim bonus allows you to transfer the discount from one vehicle to another if the new vehicle is owned by the same person. Moreover, the NCB can be transferred to a new policy if you decide to switch insurance providers. If you are selling your vehicle and buying a new one, make sure you are transferring the no claim bonus to the new vehicle. During the transfer process, the insurance company will issue a certificate and the premium may also be reduced. However, this decision may be at the discretion of the insurance company. You have to collect the transfer certificate for the NCB benefit without fail. The same applies to you if you switch car insurance providers.
Since the NCB benefit is an add-on, it will not be accessible to third-party liability insurance customers. It is only available to be purchased by people with standalone own damage insurance or comprehensive insurance policyholders.
The calculation of the no claim bonus deduction is pre-determined and very easy to understand. If you want to take advantage of the no claim bonus, make sure you do not request a claim during the policy year whether it is through calls, emails, website, or a no claim bonus app. If you claim coverage for even some minor damage to your car, you will lose the discount that NCB offers.