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Calculating NCB In Car Insurance
Aug 5, 2022

Here’s How to Calculate No Claim Bonus (NCB) in Car Insurance

As a car owner, you must know about the compulsory requirement to have an insurance cover, besides the registration and PUC for your vehicle. This regulation laid down by the Motor Vehicles Act makes it a legal requirement for not just car owners, but all types of vehicle owners in India—be it privately owned or for commercial purposes. When you buy car insurance online, the policies are divided into two broad categories—a third-party cover and a comprehensive insurance cover. A third-party policy is where only the liabilities payable by the policyholder are covered. Such liabilities may arise due to an accident causing injury to a third person or property damage. On the contrary, comprehensive plans provide not only for such liabilities but also for damages to the policyholder’s car. But other than offering a financial shield for damages to your vehicle, a comprehensive policy offers other benefits like the No-Claim Bonus (NCB). It is a renewal benefit that the insurer offers for not raising an insurance claim. Since the insurance company need not provide any compensation when claims aren’t made, this renewal benefit is awarded to the policyholder. Thus, by not making a claim, you can avail of a concession in your renewal premium.

How is the No-Claim Bonus calculated?

Comprehensive car insurance plans have three components—a third-party cover, an own damage cover, and a personal accident cover. Of these three insurance covers, a third-party cover is the minimum required insurance coverage for which the premiums are decided by the Insurance Regulatory and Development Authority of India (IRDAI). However, for own-damage cover, the premium is decided by the insurance company. Thus, any markdowns by way of no-claim bonus are calculated on such own-damage cover. The amount of concession is defined as a percentage of the own-damage premium and starts at 20% and increases up to 50% with consecutive claim-free policy periods. You can visit the official website of IRDAI for further details. * Standard T&C Apply For instance, you do not raise any claim during a policy tenure, and so, the insurer offers a renewal concession of 20% on the own-damage premium. Similarly, this amount increases with a second consecutive claim-free policy period to 25%, followed by 35%, 45%, and 50%, after three, four, and five consecutive claim-free policy periods. However, after five policy periods, this percentage is capped at 50% only. A car insurance calculator is a handy tool that can help you know the renewal benefit in your insurance policy. This is summarised in the following table:
Consecutive claim-free policy tenure Percentage of markdown on own-damage premium
One claim-free period 20%
Two consecutive claim-free periods 25%
Three consecutive claim-free periods 35%
Four consecutive claim-free periods 45%
Five consecutive claim-free periods 50%
  * Standard T&C Apply Let’s say Mr Rakesh buys a comprehensive policy with ₹20,000 as the total premium, of which ₹3000 is the third-party component. The balance amount of ₹17,000 is allocated towards own-damage premium. Now, consider that Mr Rakesh makes no claims for five consecutive policy periods. He will accumulate a no-claim bonus of 50% of the own-damage premium. This will effectively bring down the own-damage premium to ₹8,500. This way, the total premium of ₹11,500 will be required, instead of ₹20,000, saving a significant amount at renewal. * Standard T&C Apply With the significant benefit of savings in car insurance prices, a no-claim bonus is a noteworthy feature of comprehensive car insurance policies. Moreover, an NCB can be transferred to a different insurance company so that you can avoid worrying about losing its benefits when changing your insurer. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

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