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How NCB Impacts Car Insurance Premium Calculation?

By Vikas Chandra Das
21 July 2022, 11:46 AM

A No Claim Bonus (NCB) is one of the most excellent ways to save on the cost of car insurance policies. It is simply the discount offered by the insurance company for the safe driving skills that led to you making no claims in the year gone by in the policy term.

To help you understand its benefits, we will explain how the NCB has an effect on the prices of premiums.

Why and How Should You Build Your NCB?

NCB is one of the safest and sure-shot ways of saving on your premium prices. The more claims you make more will be the prices of premiums. Conversely, the company rewards you by giving a discount for making zero claims in a year. With each passing year of NCB, the discount on the premium increases. The idea is simple – make no claims and build on your NCB discount.

To achieve this, you need to do things. To start with, you should drive safely so that you do not meet with any accidents and secondly, you should avoid making any small claims. This is imperative to ensure that you have a claim-free year.

One more thing to note here is that the NCB or no claim bonus  is applied on the owner-driver and not the car. This means that even if you change your car, your NCB will still remain with you, which you can carry over to your next car. The same applies when you switch between policies as well. 

Let’s say you plan to change your old Maruti to a new Volkswagen, your NCB will carry over to your new policy and make your premium prices drop down. Since you are upgrading to an expensive car and a higher model, the premium prices will also increase so NCB helps you save money here.

How is NCB Calculated?

With each passing year of no claims, the discount you get on premiums increases by a certain percentage. It usually has a standard rate of increase, which has been mentioned below.

Here is the amount of discount you get for each added year of no claims

DetailsDiscount on Premium
No claim made during previous 1 year of insurance20%
No claim made during previous 2 years of insurance25%
No claim made during previous 3 years of insurance35%
No claim made during previous 4 years of insurance45%
No claim made during previous 5 years of insurance50%

As you can see, you save a great deal on your 6th year of the policy for not making any claims for the previous 5 years. You just have to pay half of your premium. For every no-claim year after this, you will continue to get a 50% discount.

Here is the Exponential Impact of NCB on Discount

Yes, you are not able to save anything on your first year’s premium but you can enjoy an exponential impact from the second year. To maximise your NCB benefits, the best thing to do would be to choose the right IDV for your car. 

Here is an example of how your NCB discount impacts your car insurance premium.

YearInsured Declared Value (IDV)Premium without NCBPremium with NCBSavings
1INR 3,60,000INR 11,257INR 11,257Nil
2INR 3,00,000INR 9,381INR 7,505INR 1,876 or 20%
3INR 2,50,000INR 7,818INR 5,863INR 1,954 or 25%
4INR 2,20,000INR 6,879INR 4,472INR 2,408 or 35%
5INR 2,00,000INR 6,254INR 3,440INR 2,814 or 45%
6INR 1,85,000INR 5,785INR 2,892INR 2,892 or 50%
 TotalINR 11,495

As you can see, with a car that has an initial IDV of INR 3,60,000, you can end up saving more than INR 11,000.

When do You Lose the NCB?

  • The rules of NCB are quite simple, as you just need to keep avoiding making claims by driving safely. As soon as you make a claim, the NCB benefits will perish. For example, you have not made a single claim for three years, which means you are currently enjoying a 35% discount on your premiums. However, if you make a claim in your fourth year, your NCB for the next year will go back to 0.
  • Another way you can lose your NCB is if you do not renew your car insurance policy within 90 days after your expiry date.

Is There any Way to Enjoy the Benefits of NCB Even After Making a Few Claims?

Now, the car insurance company does understand the importance of NCB and hence gives you an option of buying an add-on cover that offers immunity to your NCB from claims. Not being involved in an accident at all for many years is not practically possible, especially if you drive your car in cities. This is where an NCB protect add-on can help. 

Keep in mind that there may be minor bumps and accidents that cause damage to your car, which may require repair work. In fact, there could be damages done to your car due to some natural calamity or riot as well. But, you should not miss out on NCB benefits just for making these minor unavoidable claims.

If you get an appropriate NCB cover, you will be allowed to make a certain number of claims every year without losing your NCB benefit. The number of claims permitted varies from company to company and also on the add-on you choose to buy that.


Now that you know how NCB benefits you monetarily, you should be more motivated to make no claims. Therefore, you should drive as safely as possible so that the chances of you getting involved in an accident are next to none.

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