The no-claim bonus (NCB) is a discount that can be availed of by a bike owner on the payment of the renewal premium of the bike insurance policy. A two-wheeler insurance policyholder who does not raise any claim during the tenure of his/her previous policy year is eligible for this incentive.
The benefit of NCB applies to a comprehensive bike insurance policy. If you have opted for a third-party bike insurance plan only, you cannot get NCB benefits. These benefits apply to both standalone and comprehensive bike insurance policies. However, a third-party cover is mandatory, which you can get with a comprehensive policy too.
Benefits of NCB
The NCB is a reward granted to you for not registering any claims during the policy tenure. The accumulated NCB can be easily transferred to a new insurance company or a new vehicle if you decide to switch over.
Cuts Down on the Premiums
With each consecutive claim-free year, the percentage of the bonus that can be availed by the policyholder on the premium at the time of the two-wheeler insurance renewal progressively increases. Five consecutive claim-free policy years enable you to avail of up to a 50% discount on the premium amount, which is the maximum available bonus. Policyholders can significantly reduce their two-wheeler insurance premiums under NCB.
Acts as a Reward
The NCB is awarded by bike insurance companies as a reward or incentive to ride cautiously, which would develop your riding expertise in the long run.
Calculation of the NCB
The IRDAI has restricted the maximum bonus an insurance company can offer its policyholders. Although the percentage of the NCB increases with each consecutive claim-free year, the increment comes to a halt at the fulfillment of five successive claim-free years.
Let's take the help of this example to understand the NCB better.
|Claim-free Policy Years||Rate of NCB on the Insurance Premium|
|After completion of 1 claim-free year||20%|
|After completion of 2 claim-free years||25%|
|After completion of 3 claim-free years||35%|
|After completion of 4 claim-free years||45%|
|After completion of 5 claim-free years||50%|
As mentioned, the NCB is awarded only if no claims are registered during the policy term. Hence, even one claim can forfeit your accumulated NCBs and render you ineligible for that term.
Let’s assume that Ajay and Vinay purchase a Honda Activa 3G. Both procure a comprehensive bike insurance policy from the same insurance company. While Vinay raised a claim for damages in the first year, Ajay concluded the first policy year without making any claims.
Ajay is eligible for an NCB of 20% by the end of the first year, whereas Vinay lost out on such a benefit. If INR 14,000 (including the third-party premium of INR 714) was the premium amount for both, the NCB is affected as follows:
|Year||Ajay's Premium||Vinay's Premum|
|1||INR 14,000||INR 14,000|
|2||INR 11,342.80 (13,286-20% of 13,286) +714||INR 14,000|
The NCB applies to the own damage premium component only. So, after deducting the third-party premium of INR 714, the own damage premium component comes as INR 13,286 on which Ajay will receive a 20% NCB. The above calculation is made without considering taxes. So, if we consider that, the calculation will vary accordingly.
The logic behind keeping the third-party premium of INR 714 is as per the recent IRDAI guidelines. As per the same, two-wheelers with an engine capacity of more than 75CC but less than 150CC will have a base third-party premium of INR 714. Honda Activa 3G has an engine capacity of 109.2CC as per BikeWale, a popular bike comparison website.
Also read - How to Calculate NCB for Two Wheeler Insurance?
The Process for NCB Transfer
The NCB belongs to the individual and not the vehicle. You can easily transfer the accumulated NCB if you choose to switch your insurance provider or purchase a new vehicle.
Mentioned below are a few simple steps to transfer the NCB:
1. Notify the existing insurance provider of your decision to change your insurance plan or vehicle.
2. Procure and submit the following documents:
- Get hold of an NCB transfer certificate from the previous insurance provider by presenting a request letter for the cancellation of the existing policy. You must provide a transfer certificate to the current company insuring your two-wheeler.
- The current insurer will provide you with an NCB retention letter that you should produce while applying for the new policy to avail of the NCB benefit.
3. Submit Forms 29 and 30- the buyer and seller agreement forms.
4. Pay the premium of your new bike insurance policy at a discounted price by availing of the accumulated NCB.
When is the NCB Terminated?
The NCB stands cancelled or terminated, and you forego the NCB benefits if either of these situations arises.
- If you file for a claim in the insurance tenure.
- Failure to renew your policy even within 90 days of the policy's expiration date.
NCB Protection Add-on
Lodging a single claim can dissolve your accrued NCB and leave you ineligible to obtain a discount for the insurance term. Purchasing an NCB protection add-on cover permits you to raise two claims throughout the policy tenure without nullifying your accumulated bonus.
This optional add-on equips you to take optimum advantage of your insurance cover by raising damage-related claims while preserving your NCB simultaneously.
The Bottom Line
Technically, the NCB is a deal offered on the premium during policy renewal. The discount can vary from 20% to 50% and is rewarded for not filing any bike insurance claim requests during the policy tenure.
One effective way to keep your hard-earned NCB intact is to bear the small expenses from your pocket and abstain from raising unnecessary, minor claims. You can also procure an NCB protection add-on cover to shield your accumulated benefits from dissolving while lodging claims requests.