What the No Claim Bonus really is, in plain language

Introduction

The No Claim Bonus (NCB) is a discount on your car insurance premium that grows every year you do not raise a claim. It is one of the few parts of a motor insurance policy that directly rewards you for being a careful driver, and one of the most misunderstood. Many car owners lose it without realising why, or leave it behind when they switch insurers.

In this blog, we are going to cover what the No Claim Bonus actually means, how it builds and resets, what it does and does not apply to, when to use it and when to protect it, and how you can carry it forward when you buy a new car or move to a new insurer.

The idea is straightforward. If you have driven without a single claim in the past year, you are statistically less likely to cost the insurer money in the next year. The NCB is how that lower risk shows up in your renewal premium.

The NCB is not a cashback, a reward point, or a loyalty scheme. It is a discount calculated at renewal on one specific part of your premium, the Own Damage component. The Third-Party (TP) premium, which is fixed by IRDAI, does not change based on your claims history.

Here is how the progression works in practice:

• After your first claim-free year, a discount applies to your Own Damage premium at renewal
• The discount grows with each additional claim-free year
• The maximum discount under a standard No Claim Bonus reaches 50% after 5 consecutive claim-free years
• If you raise a claim in any year, the NCB resets, the extent of the reset depends on whether you hold NCB Protect

The NCB is calculated at renewal, not mid-policy. If your policy renews in March and you raise a claim in February, the NCB resets at that March renewal. There is no partial-year NCB credit.

One important practical point: the NCB certificate is what proves your discount to a new insurer. If you let your policy lapse for more than 90 days, the NCB is lost. Renewing within 90 days of expiry preserves it, even if the car was off the road for that period.

A standard car insurance premium has these components:

The amount you save through NCB depends on your Own Damage premium. So, even a high NCB percentage may result in a smaller rupee saving if your OD premium is low.

What happens to your NCB when you raise a claim

Raising an Own Damage claim in any policy year resets the No Claim Bonus at the next renewal. The exact mechanics depend on what you hold.

Without NCB Protect

If you raise a claim without an NCB Protect optional cover, the NCB resets to zero at renewal. Five claim-free years of discount disappear after one claim. This is the standard position under most policies.

With NCB Protect

If you hold an NCB Protect optional cover, one claim in a policy year does not reset the NCB. The discount is preserved for that renewal. Most insurers allow NCB Protect for one claim per policy year, a second claim in the same year still triggers a reset.

Third-Party-only claims

If you raise a claim only against your Third-Party cover, for example, someone else's car was damaged in the accident and you are paying their repair, the NCB is not affected. The NCB resets only when you raise an Own Damage claim against your own policy. A pure Third-Party claim does not count.

Theft claims

If your car is stolen and the claim is settled as a total loss, the NCB resets. Once the claim is paid, the policy closes and the NCB on that policy ends. If you buy a new car and a new policy, you start a fresh NCB cycle.

Can you transfer your NCB to a new car or a new insurer

Yes. The No Claim Bonus belongs to you, not to the car. Two transfer scenarios are common.

Moving to a new insurer

When you switch insurers at renewal, you carry your NCB with you. The old insurer issues an NCB certificate when the policy is not renewed with them. You submit that certificate to the new insurer at the time of buying the policy. The new insurer then applies the discount on your Own Damage premium.

The NCB certificate is valid for 3 years. If you do not buy a new policy within 3 years of the old policy's expiry, the certificate, and the NCB, expires.

Buying a new car

If you sell your old car and buy a new one, the NCB from the old car's policy transfers to the new car's policy. The old policy on the sold car does not transfer, only the NCB does. You need the NCB certificate from the old insurer to apply it to the new policy.

One thing to note: when a car is sold, the Section 157 of the Motor Vehicles Act allows the insurance policy to transfer to the new owner within 14 days. But the NCB does not transfer to the buyer. The seller retains the NCB and can use it on their next vehicle.

The claim-vs-pay decision

Ask yourself: is the repair cost larger than the NCB discount I would lose?

If the repair is minor, a small dent, a cracked side mirror, a scratched bumper, paying for it out of pocket may save more money over the next few years than claiming and losing the NCB. This is not a rule that applies every time; it depends on how large your current NCB discount is and how expensive the repair is.

NCB optional cover

If you want to protect the NCB without making the claim-vs-pay calculation every time, the NCB optional cover is worth considering. It lets you raise one Own Damage claim in a policy year without losing the discount. The cost of the optional cover is an additional premium, weigh it against the value of the NCB discount it protects.

Keeping the IDV accurate

The Own Damage premium, and therefore the rupee value of your NCB discount, depends on the Insured Declared Value (IDV) of your car. Some owners underinsure the car to lower the premium. This also reduces the NCB discount in rupee terms. More importantly, a low IDV means a lower payout if the car is stolen or damaged beyond repair. Keep the IDV at the correct market value.

• Only with Kiwi, Super NCB builds to 90%, significantly higher than the 50% ceiling on a standard No Claim Bonus, giving you a larger discount on your Own Damage premium at renewal.
• If you raise a claim, Kiwi Super NCB steps down by one level. It does not reset to zero. Your years of careful driving are not erased by a single incident.
• The result is up to 40% more discount than a standard No Claim Bonus at the same stage of claim-free driving.

To explore your car insurance options and see how Super NCB works with your policy, check your Kiwi policy document or speak to the team.

Head to Kiwi Insurance to check your renewal options and see how Super NCB protects what you have earned.