Comprehensive car insurance policies offer a No Claim Bonus if the policyholder does not make a claim in his/her car insurance policy in a policy year. This No Claim Bonus (NCB) is awarded as a discount in the next year’s car insurance premium. Moreover, the NCB also increases with every subsequent claim free year. It starts at 20% for the first claim-free year.
In the second subsequent claim-free year the NCB increases to 25%, then 35%, 45% and, finally after five successive claim-free years, the bonus becomes 50%. This NCB is a great way of availing a premium discount every time the car insurance policy is renewed. But what if the car is sold or there is a claim? What would happen to the accumulated NCB?
Reserving NCB in case of sale of a car
In case of sale of the car, the NCB is retained in the name of the original policyholder. The NCB in the car insurance policy is meant for the policyholder, not the car. Therefore, when your customer sells his/her car, the accumulated NCB stays with your customer while the car and the insurance policy are transferred in the name of the new buyer. To retain the NCB, your customer would simply have to follow these steps –
- He/she should submit RTO’s Form 29 and Form 30 to the insurance company along with a request letter for the transfer of the NCB
- The insurance company would then issue an NCB Certificate which would state the NCB accumulated in the policy. The certificate would be in the name of your client.
- When your client buys a new car, the NCB certificate can be furnished to the insurance company to claim a discount in the premium payable for the car insurance policy
Reserving NCB in case of a claim
The NCB, though offers a good discount, is lost as soon as there is a claim in the car insurance policy. That is why if the policyholder wants to reserve the NCB in the policy, the following steps can be taken –
Not making small claims
If the claims are small and affordable, it is better for policyholders to meet the repair costs themselves. By paying a small repair cost the accumulated NCB can be saved. For instance, if the accumulated NCB is 50% and there is a claim in the policy which amounts to INR 5000 or INR 10,000, the customer would be better off paying the claims from his/her own pockets. The NCB would be reserved and in the next year’s premium, the policyholder can enjoy a discount of 50%.
Choosing the NCB protect add-on
There is an add-on in car insurance policies which is called the NCB protect add-on. This add-on preserves the accumulated NCB even if the policyholder makes a claim in his/her car insurance plan. Thus, if the policyholder does not want to pay the claims himself/herself, he/she can pay a small additional premium and choose the NCB to protect add-on which would help maintain the NCB even in a claim.
These are the ways in which the NCB can be ‘reserved’ when the car is sold or if there is a claim. However, there are some points regarding NCB which should be kept in mind –
- No NCB is allowed in third party liability only plans. NCB is available only in comprehensive policies
- NCB is calculated on the own damage premium of the car insurance policy and not the overall premium which includes third-party liability premium too
- In case of sale of a car, the NCB certificate is valid for 3 years from the date that it was issued. If your customer does not immediately buy a car, the certificate can be retained for up to 3 years when it can be used for claiming a discount on a new car insurance policy bought within the next 3 years
- In case of sale of the car, the NCB certificate can be used on a new car insurance policy only. If the policyholder buys a bike and a new bike insurance policy, the reserved NCB would not be applicable
- There is a sunset clause on NCB on policies which were renewed between 1st July 2002 and 30th June 2003. As per the earlier tariffs, NCB of up to 55% or 65% were allowed in car insurance policies. If those rates have been preserved, the policyholders can carry forward such NCB rates.
So, educate your customers about the benefit of NCB and the ways in which they can ‘reserve’ their NCBs for claiming a maximum discount on their car insurance policies.