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A No Claim Bonus (NCB) is a way for the insurance company to reward the policyholder for safe driving. The bonus is offered as a discount in the premium paid for the comprehensive bike insurance policy. While the IDV of the bike goes down every year, the insurance premium may actually go up because of the inflation in the economy. This is why even a small discount on the premium is highly beneficial for the policyholder. This makes NCB an important part of the two wheeler insurance policy.
It is important to remember that NCB is only applicable for comprehensive two wheeler insurance policy. If you have instead opted for a third party liability two wheeler insurance policy instead, you will not be able to benefit from NCB despite having a claim-free year. This article will look at different aspects of the no claim bonus including how it is calculated.
For every year you do not file an insurance claim, you would accumulate a no claim bonus. The maximum NCB that you can accumulate is equal to 50% of the premium on your comprehensive two wheeler insurance, which can be accumulated in five years. For every year that you do not file an insurance after the maximum is reached – you do not accumulate any additional discount and have to pay half the applicable premium.
If you file a claim and the insurer pays out, the NCB would fall back to zero. That is, you will have to pay the full bike insurance premium at the time of next renewal. That said, if it is determined that you were not at fault during an accident and were covered by the third-party insurance cover of the other party involved – i.e. your insurer did not have to pay out, then the No Claim Bonus would continue to accumulate. In other words, the no claim bonus is lost only if your insurer has to pay out and not just because you filed a claim. If your claim is not honoured, then NCB will not lapse. So, if both parties involved in an accident are determined to be at-fault or if your bike is stolen, the NCB would lapse as the insurer will have to pay out the claim.
All insurers have to offer the same no claim bonus as has been approved by IRDAI. For comprehensive two-wheeler insurance policies, NCB starts at 20% discount for the first renewal and can go up to a maximum of 50%. It is calculated as shown in the table below:
|Number of continuous claim free years||Discount percentage on the insurance premium|
|No claims made during the preceding one year of insurance coverage||20%|
|No claims made during the preceding two years of insurance coverage||25%|
|No claims made during the preceding three years of insurance coverage||35%|
|No claims made during the preceding four years of insurance coverage||45%|
|No claims made during the preceding five or more years of insurance coverage||50%|
As can be seen from the table above, the maximum discount that can be availed as NCB is 50% of the premium due. It is important to remember that the NCB is offered to the policy holder and is not tied to the two wheeler in question. If the policyholder buys a new bike or decides to switch the insurer, she can still avail the NCB discount on the new bike insurance policy.
It is also important to remember that NCB can only be availed if the insurance policy is renewed before the grace period lapses. It is advisable to renew your policy a day or two before the expiry date to ensure continuous coverage. Still, if you miss the expiry date most insurers give you a grace period of 90 days during which you can renew your policy without any penalty and with NCB intact.
The NCB discount is only applicable on the own damage premium of your comprehensive two-wheeler insurance policy. The premium for comprehensive bike insurance is made up of three components: Own Damage (OD) premium, third party liability premium and personal accident cover premium. Out of these the third party liability premium and the PAC premium is fixed by IRDAI which mandates that every two wheeler on Indian roads have a third party cover and a PAC of at least Rs 15 lakh. The discount, therefore, is only applicable to the OD premium. Further, the add-on covers that you opt for typically have no impact on the no claim bonus. If you choose to drop any of the add-ons that you had opted for earlier or decide to get new add-on covers, the no claim bonus remains the same. Therefore:
Comprehensive Two-wheeler Insurance Premium = OD Premium + 3PL Premium + PAC Premium + Add-on Cover Premium – No Claim Bonus on OD premium
No Claim Bonus is a reward for good driving. It acts as an incentive to not make small claims that could lead to lapsing of the NCB. It usually does not make economic sense to make a claim for less than Rs 2,000 in the first year. The amount rises with each consecutive year as the quantum of discount also rises. The greatest benefit of NCB is that it allows one to get the same level of coverage at a much lower cost. It also acts as an incentive to not allow the policy lapse between renewals.
NCB for long term two wheeler insurance policy works differently from single-year policy. In a three-year policy, the NCB falls to zero only if at least three claims are made in the three-year policy period. If no claims is made in the three year period, a 45% discount is offered and it is reduced for one or two claims. It is reduced to 0 only on the third claim. This is another reason to choose a long term two wheeler insurance policy over the standard one-year policy.
Another benefit of NCB is that the first premium of your new bike can also be discounted based on the bonus accumulated on your previous bike. This is because the NCB is accrued in your account and the account of your bike.
NCB policy is based on your claim record, and as such it cannot be transferred from one policyholder to another. For example, if you sell your bike to another rider – the NCB will not be transferred with the ownership.
That said, the NCB you have accumulated can be transferred to the new policy you would take out for a new bike or if you decided to switch insurers. Upon cancellation of your existing policy, you will receive a NCB retention letter from your current insurer. You will have to present the same when applying for the new insurance policy to avail the NCB discount. You would need to present the following documents to the insurer to get the NCB retention letter:
The last three documents are only needed if you sell your old bike. Just present the NCB retention certificate when applying for the new insurance policy to avail the NCB discount on the two wheeler insurance premium.
As stated earlier, you can avail NCB discount only if you have made no claims in the preceding year. If you make even a single claim, the NCB goes down to zero. However, you can purchase a NCB Protection Add-on to safeguard your accumulated NCB discount.
With this add-on, you can make up to two claims within the policy period without losing your accumulated NCB. This allows you to benefit from your insurance cover without having to pay a higher premium the next year for doing so.
As stated earlier, no other add-on has any impact on your accumulated NCB. You can opt in or opt out of any other add-on covers and your NCB discount will stay the same.
If you are renewing your two-wheeler insurance policy from the same insurer, all you have to do is mention that you have an accumulated bonus on the renewal form. The NCB will be automatically applied on the premium due for the next policy period.
If you are switching insurers, or if you would like to avail NCB when insuring your new bike, you will have to present the NCB retention certificate from your previous policy along with your insurance policy proposal. You can request for this certificate after you request the cancellation of your previous policy. The discount offered as NCB for annual two wheeler insurance policy is fixed by IRDAI as shown below:
|Number of claim-free years||NCB discount on the premium|
At the time of 1st claim-free renewal
At the time of 2nd claim-free renewal
At the time of 3rd claim-free renewal
At the time of 4th claim-free renewal
At the time of 5th claim-free renewal
You can request your insurer to provide you a NCB retention certificate after you request for policy cancellation. The insurer would ask for the following documents:
The last three documents are only needed if you sell your old bike
The NCB can be transferred from one bike to the other, for the same policyholder. For each concurrent policy the NCB will be accumulated separately.
NCB retention certificate is valid for up to two years from the date of issue, if you have not availed in on a new policy yet. The date of expiry will be mentioned on the NCB retention certificate.
To avail NCB discount on second hand bike that you have purchased, you will have to get the NCB retention certificate from your insurer as stated above.
You can use a two wheeler insurance premium calculator to get an estimate of the premium for your insurance policy. NCB is available on all comprehensive bike insurance policy.