How NCB (No Claim Bonus) Works in Car Insurance: Complete Guide for Indian Drivers in 2025
Car insurance is a vital financial safety net that protects drivers against unexpected expenses from accidents, theft, or damage. Among the many features that make car insurance more affordable, the No Claim Bonus (NCB) stands out as a rewarding incentive for safe and responsible drivers. Understanding how NCB works, how to earn it, and how to preserve it can save thousands of rupees on insurance premiums in the long run.
This comprehensive guide explains everything a car owner in India needs to know about No Claim Bonus in car insurance in 2025 — from what it means, how it accumulates, its impact on premiums, conditions for forfeiture, transferability, and tips for maximizing this valuable benefit.
What is No Claim Bonus (NCB) in Car Insurance?
No Claim Bonus (NCB) is a discount offered by insurance companies on the own damage premium component of your car insurance policy if you do not file any claim during the policy period (usually one year). It is a reward for being a safe driver who does not require compensation from the insurer during the policy term.
NCB acts as a loyalty bonus, encouraging policyholders to avoid making minor claims and maintain safe driving habits. It is only applicable on comprehensive car insurance policies, which include coverage for own damage (damages to your vehicle) besides third-party liability.
How Does NCB Work?
- When you buy a fresh car insurance policy, NCB starts at 0% because there are no claim-free years yet.
- If you do not make any claim during the policy period, you become eligible for a No Claim Bonus discount on the next policy renewal.
- The NCB discount typically starts at 20% after the first claim-free year and increases with consecutive claim-free years.
- The maximum discount you can earn is 50% after 5 continuous claim-free years.
- The discount is applied only on the own damage (OD) premium, not on the third-party liability premium, which is governed by IRDAI rates.
- If you raise a claim, your NCB is reduced or reset depending on your policy terms.
- You can transfer your accumulated NCB when switching insurers or buying a new car, as long as you have valid proofs.
NCB Discount Slabs for Car Insurance in India
| Number of Claim-Free Years | NCB Discount on Own Damage Premium |
|---|---|
| 1 year | 20% |
| 2 consecutive years | 25% |
| 3 consecutive years | 35% |
| 4 consecutive years | 45% |
| 5 or more consecutive years | 50% |
For example, if your own damage premium is ₹10,000 and you have a 3-year claim-free record, your premium at renewal will be reduced by 35%, meaning you pay only ₹6,500 for the own damage portion.
Benefits of No Claim Bonus
- Significant Premium Savings: NCB can reduce your premium costs by up to 50%, resulting in substantial annual savings.
- Encourages Safe Driving: It rewards good driving behavior by encouraging policyholders to avoid claims.
- Transferability: You can carry forward your NCB when changing insurers or cars, ensuring you don’t lose your earned benefit.
- Cumulative Savings: Over consecutive years, the discount builds up, lowering your long-term insurance costs.
- Customizable: Some insurers offer NCB protection add-ons allowing policyholders to claim without losing NCB for minor claims.
How to Calculate No Claim Bonus (NCB)
Insurance companies apply the NCB discount on the own damage portion of the car insurance premium (not the third-party premium).
Example Calculation:
Suppose you renew your insurance and the total premium is ₹20,000, of which:
- Own damage premium (OD Premium) = ₹15,000
- Third-party premium (TP Premium) = ₹5,000
If you qualify for a 20% NCB:
- Discount on OD premium = 20% of ₹15,000 = ₹3,000
- New premium payable = ₹15,000 – ₹3,000 + ₹5,000 = ₹17,000
This means you save ₹3,000 on the renewal premium for maintaining a claim-free record.
For a better understanding of NCB calculations, you can visit SBIGeneral: How NCB is Calculated.
Conditions for Losing No Claim Bonus
Your hard-earned NCB can be forfeited or reduced under certain circumstances:
- Making an Insurance Claim: If you file a claim during the policy period, your NCB usually resets to zero or is reduced depending on the insurer’s policy.
- Failure to Renew On Time: Not renewing your policy within the grace period (usually 90 days) after expiry may lead to losing NCB.
- Policy Cancellation: If the policy is cancelled mid-term, NCB eligibility can be affected.
- Transferring NCB Without Proper Documentation: If you fail to provide a valid renewal policy or NCB proof while switching insurers or vehicles, your NCB is not transferred.
Some insurers provide NCB Protection Add-ons that allow you to make limited claims without affecting your NCB, useful for minor damages.
How to Protect Your NCB?
- Opt for the NCB Protection Add-on from your insurer if available.
- Avoid making claims for small or minor damages which you can afford to repair privately.
- Always renew your policy on time to maintain continuity.
- When switching insurers, obtain a No Claim Bonus Certificate from your current insurer.
- Maintain careful driving and vehicle upkeep to avoid accidents and claims.
How to Transfer Your NCB
NCB is linked to the policyholder and not the specific vehicle or insurer. This means you can transfer your discount under these scenarios:
- Switching Insurers: Provide proof of continuous insurance and no claims from your existing insurer while buying a new policy.
- Buying a New Car: Transfer NCB from the old vehicle’s policy to the new one by showing valid documents.
- Renewing Policies: If renewing with the same insurer, NCB is automatically applied if you have maintained a claim-free record.
Make sure to ask your insurer for an NCB Certificate as official proof of your no-claim history. Without this, some insurers may refuse to honor your accrued discount.
Learn more about how to transfer your NCB here: ICICI Lombard – NCB in Car Insurance.
Frequently Asked Questions About No Claim Bonus
Q1: Is NCB applicable on third-party car insurance?
No, NCB applies only to the own damage component of comprehensive car insurance and not on third-party only policies.
Q2: What happens if I make a small claim?
Any claim made generally affects your NCB, either reducing or resetting it. However, if you opted for NCB protection add-on, minor claims might not impact your bonus.
Q3: Can I increase my NCB by skipping claims intentionally?
Yes, but remember NCB motivates safe driving, so skipping claims for minor damages you can afford will help you save in the long term.
Q4: How do I prove my NCB to a new insurer?
Your current insurer provides an NCB certificate or renewal policy document reflecting your NCB discount.
Q5: Can NCB be transferred between family members?
No, NCB is policyholder-specific and cannot be transferred between different individuals.
Summary: Why NCB Matters for Every Car Owner
No Claim Bonus is an important feature that can drastically reduce your car insurance costs over time. It incentivizes safe driving habits and ensures that you benefit financially for maintaining a clean claims record. With premiums gradually rising, unlocking a 50% discount on your own damage premium is a smart way to save money.
Maintaining your NCB requires:
- Prudence while driving to avoid accidents
- Timely renewal of your car insurance policy
- Proper documentation while switching insurers or vehicles
- Considering add-ons like NCB Protection for peace of mind
By understanding the mechanics of NCB, Indian car owners can maximize their insurance savings while enjoying adequate protection and peace of mind.
Additional Resources for Car Insurance and NCB
- HDFC ERGO – What is No Claim Bonus?
- Bajaj Finserv – No Claim Bonus in Car Insurance
- ICICI Lombard – Get No Claim Bonus
- SBI General – How NCB is Calculated
- IFFCO Tokio – No Claim Bonus Explained