Do you know that a car insurance policy is legally mandatory? If you have a car, of course, you must. A car insurance policy requires annual premiums for renewing the cover. Who likes paying this premium? Dislike it as much as you want, but you cannot avoid a car insurance premium. But what if I told you that there is a way to lower your car insurance premium?
Yes, where the law mandates a valid car insurance cover, it also allows you a relief in your premiums through No Claim Bonus discounts. Do you know how?
No-Claim Bonus (NCB)
If you do not make any claim in a policy year, you earn a No-Claim Bonus in your car insurance policy. This No-Claim Bonus gives you a premium discount in the subsequent year’s premium. Moreover, for every subsequent year where you do not make a claim, the rate of the No-Claim Bonus discount increases.
So, using your No-Claim Bonus discount, you can earn a reduction in your car insurance policy’s renewal premiums and save money. So, what is the extent of discounts that you can earn? Would you believe if I say up to 50%?
Here is the rate of No Claim Bonus discount, which is available for every subsequent no-claim year on your car insurance policy:
|After one claim-free year||20%|
|After two consecutive claim-free years||25%|
|After three consecutive claim-free years||35%|
|After four consecutive claim-free years||45%|
|After five or more consecutive claim-free years||50%|
Amazing, isn’t it? So, if you are asked to pay a renewal premium of Rs.5000 for your car insurance policy, you can earn a No-Claim Bonus discount ranging from 20% to 50% depending on the number of consecutive claim-free years in your car insurance history.
Though the NCB discount lowers your premium outgo, there are certain points which you should remember with respect to the NCB discount available:
- The discount is available only when the policy is renewed.
- NCB discount is applicable for comprehensive car insurance policies only. If you have a third party insurance policy, no NCB would be allowed. This is because of the fact that NCB reduces only the ‘own damage’ premium. Third party premium is determined by IRDA (Insurance Regulatory Development Authority) and is a fixed rate irrespective of the claim history.
- You can port your NCB discount when you port your car insurance policy.
- If you make a claim in any year, you lose the accumulated NCB discount. After the claim, the NCB rate starts again from 20% in the next year. For instance, suppose you are entitled to a NCB discount of 45% in your policy which would be renewedin July 2017. Ifyou make a claim in April 2017, you would lose the discount. The policy would be renewed in July 2017 without any NCB discount. Moreover, in July 2018, when your policy would be up for renewal, the rate of NCB discount would start from 20% provided you did not make any claim in the policy year from July 2017 to July 2018. You can avail maximum NCB of up to 50%. The discount doesn’t increase further, even if you haven’t made any claims in the future years. Your NCB discount would remain stagnant to 50%.
- You earn discounts on NCB over the span of years however, it won’t be shared between two policies.
- You would waste on your NCB, if you cancel your car insurance policy before the completion of the policy period. This is because, you fail to earn NCB for that particular year.
How to make the most of your NCB discount?
To enjoy the highest possible NCB discount, you should follow the below-mentioned steps:
- Avoid minor claims
If you suffer minor damages to your car, the repair cost of which is not very high, you should not make a claim. If you do, you would lose the increased NCB discount. So, weigh in the savings resulting from your NCB discount against the repair costs. If the savings are high, avoid making small claims and retain your cumulative NCB discount.
- Get a NCB certificate when transferring your NCB
The earned NCB discount belongs to you. As such, when you sell your vehicle or port your existing policy, you can retain your NCB discount. To retain your NCB you would have to transfer your NCB to your new vehicle or new policy. When transferring the NCB, get a NCB certificate from your existing insurance company. This certificate is valid for 3 years and serves as a proof of your earned NCB.
- Buy a NCB protector add-on cover
Car insurance policies allow an add-on NCB protector. This rider protects your NCB even if you make a claim in any policy year. You can opt for this add-on and protect your earned NCB discount. Every insurer has their own terms and conditions for the number of claims that are allowed if you opt for the NCB protector add-on.
The NCB discount available in your car insurance policy helps you in saving money by reducing your premium. Know about the discount, its features and also the ways in which you can enjoy the maximum possible NCB discount. After all, who doesn’t like saving money? If you drive like a good boy/girl, you would definitely be rewarded with a No claim bonus by your insurer. Make use of this reward and save your bucks on your car insurance premium.