5 Things to know about No Claim Bonus on Car Insurance


If you have a Car, you would certainly be having a Car Insurance from one Insurance provider or another. Car Insurance Premium is paid annually and in case of any accident – the Insurance Company will come to your rescue and bear the financial burden arising due to the accident. You can make a claim to the Insurance Company and they will bear the financial burden arising out of this accident.

There are several factors which are taken into account in determining how the policy amount is being computed. One of these factors is the No Claim Bonus given by the Insurance Company to the Drivers.

What is No Claim Bonus?

To encourage people to drive safely, Car Insurers give an incentive to drivers who drive safely. This incentive is in the form of a bonus which the drivers get in case they don’t make any claim to the insurance company.

This is referred to as No Claim Bonus which is given to the drivers at the time of renewing the Car Insurance Policy. At the time of renewal, this amount is subtracted from the total premium payable and the driver is only required to pay the balance amount.

Driving a car

Driving a car

5 Things to know about No Claim Bonus

  1. Amount of No-Claim Bonus

The No Claim Bonus given by the Insurance Company is in the range of 20% to 50% and keeps on increasing every year. If No Claim is made in the 1st year, the No Claim Bonus given is 20%. In case No Claim is made for 2 consecutive years, the No Claim Bonus is increased to 25%. The complete rate grid for No Claim Bonus is given below

No Claim Bonus Rate Grid

Particulars Amount
After 1 claim free year 20%
After 2 Consecutive claim free years 25%
After 3 Consecutive claim free years 35%
After 4 Consecutive claim free years 45%
After 5 Consecutive claim free years 50%

This can be explained with the help of an example. If you have a Honda City for which the Insurance Company charges Rs. 20,000 as Insurance Premium and you don’t make any claim in the 1st year, you will get a discount of Rs. 4000 i.e. (20% of Rs. 20,000). If you don’t make any claim in both the 1st and the 2nd year, you will get a discount of 25%.

However, in case you make a claim in any year, you will loose the No Claim Bonus benefit for the next insurance renewal.

  1. Prefer not to claim small amounts from the Insurance Company

As explained above, No Claim Bonus benefit is given for each year in which you have not claimed the financial loss from the Insurance Company. However, in case you make a claim – you end up loosing the No Claim Bonus.

Therefore, before making a claim from the insurance company – you should think about the claim that is being made and the No Claim Bonus which you will loose as a result of making this claim.

If in the above example, you are making a claim of Rs. 3,000, you should also keep into account that you’ll loose the No Claim Bonus of Rs. 4,000. If you make a claim in such a case, you get Rs. 3,000 but you end up loosing the benefit of Rs. 4,000. In such a case, it is advisable that you don’t make the claim and rather pay it from your own pocket.

  1. No Claim Bonus applicable per person and not per Car

No Claim Bonus is applicable per person and not per Car. Therefore, if you sell your car after 4 years and purchase a new car – you can still claim the benefit of No Claim Bonus.

If you have not made any claim in the first 4 years, you are entitled to get a No Claim Bonus of 50%. You can claim this 50% Bonus even if you purchase a new car.

  1. Applicable even if you switch Insurers

The No Claim bonus is given even if you switch from an insurance company to another. For eg: If for the first 4 years, you had taken a Car Insurance Policy from SBI and you intent to shift to ICICI in the 5th year, ICICI will also give you a 50% No Claim Bonus benefit.

  1. Not Applicable on third-party insurance cover

The no claim bonus is only applicable only to the own damage premium component and not on the 3rd party insurance liability premium.

Therefore, in case you only have the 3rd party insurance and not the own damage insurance component, bonus would not be given in this case. In case you have both the 3rd party insurance as well as the own damage insurance, No Claim Bonus would be given to you proportionately.

Protecting your No Claim Bonus

No Claim Bonus is a very big incentive which is given by the Insurance Company to the drivers for safe driving. This bonus in some cases goes upto 50% as well. However, you end up loosing this benefit even if you make 1 claim.

To protect the interest of the drivers, car insurance companies also give them an Add-on cover through which they can protect their No Claim Bonus even if they make a claim during the year. Car Insurance Companies like Bharti Axa offer an add-on cover through which you can claim this Bonus even if you make 2 claims during the policy period.

This add-on cover is optional and is at the discretion of the driver whether they want to take this add-on or not.

How to Transfer No Claim Bonus

If you are selling a car to purchase a new car or are switching your insurance policy from one insurer to another, you would be required to obtain a No Claim Bonus Certificate from your existing insurer and submit this to the New Insurer. You would also be required to submit Form 29, 30 (buyer-seller agreement form).

If you are switching to a new insurer at the time of policy renewal for your new car, you only need your last year’s policy document or renewal notice that mentions the NCB you are eligible for.

If you are buying the policy online, it is likely that you will not have to submit the certificate – your NCB would be transferred based on the declaration. However, this does not mean that you can suppress any claims by giving false declaration as the new insurer can cross-verify such information with your previous insurance company. If the insurer finds out that there is any false declaration, the new insurer can send you a notice for the recovery of the discount you may have claimed earlier.

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A Personal Finance enthusiast, Karan is the founder of charteredclub.com and loves to discuss about Money related matters.