A comprehensive car insurance plan not only covers the mandatory third-party insurance for your vehicle but also provides coverage for any damages to your own vehicle as well! In fact, a comprehensive car insurance plan comes with a whole lot of additional benefits as well. For starters, it offers you a no claim bonus if you do not make a claim in the preceding policy year (s). So, for every successive claim-free year that you experience, you earn a higher no claim bonus (NCB).
Now, how does this bonus help you? Simple. The no-claim bonus earns you a premium discount in the next year’s premium. So, when you renew your car insurance policy, you get an equivalent discount on the own damage premium from your NCB! Not only this, but you can also keep adding the NCB over the years and choose to transfer the policy in case you plan to upgrade your car!
Remember: NCB is given to the driver and NOT the vehicle!
The rate of no claim bonus starts at 20% for the first claim-free year. Thereafter, the discount keeps increasing. It reaches 50% after five successive claim-free years. Well, that is the maximum discount you can get! But isn’t that fantastic?
Here are the no claim bonus rates depending on your claim experience –
Impact of claim on NCB
Though the no claim bonus allows attractive premium discounts, it becomes zero if you make claim in the policy. Irrespective of the number of successive claim-free years you have had, one claim and your NCB reduces to zero. You get no discount on the renewal premium next year. Thereafter, the NCB rate starts again from 20% from the next policy year.
So, even if you have accumulated a 50% NCB, you go back to zero if you make a claim. How do you, then, preserve your NCB if you have to make a claim?
Option 1: Don’t claim, especially the smaller ones.
Option 2: Opt for no claim bonus protection add-on!
Add-ons are optional coverage benefits that you can add with your comprehensive or standalone own-damage car insurance plan by paying an additional premium. The no-claim bonus protection add-on is one such optional coverage benefit that is available with most car insurance policies. If you choose this add-on, you can protect the accumulated no claim bonus in your car insurance policy even if you have a claim.
Suppose you have a car insurance policy wherein you have not made any claims in the last three years. The available no claim bonus that you have under the plan is 35%. Now, in the fourth year, you incur a claim of INR 65,000 that you raise on your car insurance policy. The insurer settles the claim. This is what would happen when you renew the policy next year –
Thus, with the addition of the no claim bonus add-on, you can save INR 2975 when you renew your car insurance policy.
Moreover, there is no limit to the claims that you can make under this add-on. Irrespective of the number of claims that you make, if you have opted for the no-claim bonus add-on, the accumulated NCB discount would remain intact.
To avoid losing out on the no claim bonus, you should avoid making small claims. Try and pay such claims from your own pockets. However, if the claim is considerable and you want to protect the accumulated NCB, opt for the no-claim bonus protection add-on. At a small amount of premium payable for the add-on, you can enjoy higher savings on the premium if you do suffer claims during the policy year.
When buying the no claim bonus protection coverage benefit, compare the add-on premium rate of different insurers. Choose an insurer that charges a lower rate so that you can save on the premium cost as well. So, choose the no claim bonus protection add-on and protect your policy’s no claim bonus even if you incur claims.
(By Dhirendra Mahyavanshi, Co-Founder, Turtlemint (An InsurTech Company)