Understanding No-Claim Bonus in Insurance

No-Claim Bonus (NCB) is a reward that insurance companies offer to policyholders who don't make any claims during a policy year. It's a powerful way to reduce your insurance premiums over time.

How NCB Works — For each claim-free year, you earn a discount on your renewal premium. The discount typically starts at 20% after the first year and can go up to 50% after five consecutive claim-free years.

NCB Accumulation — The bonus accumulates year over year. For example: Year 1 claim-free = 20% discount, Year 2 = 25%, Year 3 = 35%, Year 4 = 45%, Year 5 and beyond = 50% discount.

Protecting Your NCB — Some insurers offer NCB protection add-ons that let you make a claim without losing your accumulated NCB. This is especially valuable for policyholders with high NCB percentages.

NCB Transfer — Your NCB belongs to you, not your vehicle. When you sell your car and buy a new one, you can transfer your NCB to the new vehicle's policy, even if you switch insurers.

Strategic Considerations — For small damages, it might be more cost-effective to pay out of pocket rather than filing a claim and losing your NCB. Calculate the long-term savings from maintaining your NCB before deciding.