These neighbours’ daily routine of watering plants lead to a conversation on how a no-claim bonus works
Bindu: Soon these plants will start flowering — a reward for all the good care.
Sindu: Yes, if it pays my bills, why not!
Bindu: You can earn rewards from paying bills, too, sometimes.
Sindu: Is that so? How?
Bindu: Well, take motor insurance, for instance. Your insurer will reward you if you have been a good driver the previous year.
Sindu: My insurer will pay me cash if my vehicle wasn’t involved in any accident, is it!
Bindu: Ha ha! You’re expecting too much! The insurer will give you a discount on your motor insurance policy. It’s really not about having an accident either. You’ll get a discount as long as you haven’t made a claim in the past year. This is called no-claim bonus, or NCB.
Sindu: Does that mean I don’t have to pay any premium at the next renewal?
Bindu: No, no. You get a 20 per cent NCB discount if there is no claim filed by you during the first year. After that, you get an additional 5 per cent discount from your second year.
If you did not make any claims for a few years, you could earn discounts of up to 50 per cent at the end of five years.
Sindu: This is good. But surely there must be strings attached?
Bindu: Clever of you! This is only available on your own-damage cover and not on the third-party portion of it.
Sindu: But what happens to my reward if I sell my vehicle?
Bindu: NCB is for the policyholder and not the vehicle. Therefore, even if you replace your existing car or bike, as long as you have been renewing the motor insurance policy, you get to retain your NCB. NCB is not transferable. This means that if you sell your vehicle, you can retain your NCB by obtaining an NCB retention certificate from your insurer. This will help you get a discount on the premium when you buy the next vehicle. Check with your insurer about the validity of this certificate. It is usually valid up to three years.
Sindu: So, NCB will only benefit me if I haven’t made any claim. But my car always takes a few knocks — you know how people drive!
Bindu: Well, there is a solution for that as well. Some insurance companies, such as ICICI Lombard and Reliance General Insurance, offer NCB add-ons to protect the benefit you receive.
So, if you opt for this add-on cover, it allows you to keep the NCB discount even if you raise any claim request, up to a certain limit.