Tag: NCB

Two friends, Dom and Kabir, meet over a cup of tea and find themselves discovering some goodies in vehicle insurance.

Kabir: I see that your new car is well maintained even after a year. Congratulations.

Dom: Yes, not a scratch in the past year. My family is finally convinced that I can drive. And judging by the premium charged for renewing my car insurance, even my insurer seems happy with my performance.

Kabir: Why, did he waive your payment?

Dom: No, but he did give me a good discount. While going through the renewal rates, I found that I automatically got what is called a ‘no claim bonus’. This brought down my premium by 20 per cent. This got me curious, and after some reading I found that as a reward for not making any claims during a year, you get a discount on the premium you pay. The initial 20 per cent discount gradually increases up to 50 per cent, after five continuous years of making no claims on your policy.

Kabir: So, a sizeable discount on your premium, which must come to ₹12,000-15,000 per year, I believe.

Dom: Not so fast, this discount is applicable only on own damage cover, which is only a portion of your premium charge. Depending on individual policies, a large part of the premium will be towards the compulsory third party insurance cover, which is not taken into account for no claim bonus discount calculations.

Kabir: Do you have to stick with the same insurer over the entire five-year period to enjoy the discount?

Dom: No, that is not so. ‘No claim bonus’ is owned by the policyholder and is transferable to any insurance provider of his choice and also to any new vehicle that the policy holder may insure while replacing his earlier vehicle. The policyholder has to generate a certificate proving that no claims have been made in the past year and get a relevant discount on his/her premium. Note, the bonus cannot be transferred to another policyholder who acquires the vehicle. That person will be charged according to the rates relevant to his/her policy.

Kabir: Ok, sounds fair. But you stand to lose the discount after a claim. Right?

Dom: Yes, the discount resets to zero after you make a claim. So you have to make a calculated call on the benefit from the claim versus the loss of discount on your next renewal price. But, I came across an add-on feature that a few insurance providers are offering that can let you keep your no claim discount even when you make a claim up to a certain pre-determined limit.

Kabir: So, in effect, responsible and accident-free use of a vehicle will be rewarded through lower premiums. A fair practice, indeed.