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10 Key Features Of 'No Claim Bonus' On Motor Insurance

You can earn massive reward from the insurance company, if you are a SAFE driver.

This comes in the form of "discount", on the premium payable on your vehicle insurance policy.

In insurance parlance, this is known as No Claim Bonus. As the name indicates, you become eligible for this discount, provided you haven't made any insurance claims towards your vehicle.

More importantly, this discount keeps increasing year after after (naturally subject to a maximum limit), with every CLAIM FREE policy renewal.

The No Claim Bonus has many interesting features to it.

Let's explore:

1. Quantum of No Claim Bonus
The DISCOUNT that you get on the premium payable, is linked to the number of claim-free years, as detailed below:

20% : If no claim is made in the previous full year of insurance
25% : If no claim is made in the previous TWO consecutive years
35% : If no claim is made in the previous THREE consecutive years
45% : If no claim is made in the previous FOUR consecutive years
50% : If no claim is made in the previous FIVE consecutive years

2. Discount only on Own Damage Premium
As you may be aware, your vehicle insurance comprises two parts.

One is the insurance cover for any loss or damage to your vehicle, known as Own Damage Cover.

Second is the insurance cover for any loss or damage to the third party due to your vehicle, known as Third Party Liability.

The discount on account of No Claim, as per the above formula, is available only on the premium payable towards the Own Damage Cover. Third Party Liability premium is not eligible for any such discount.

By the way:
While Third Party Liability is mandatory, Own Damage Cover is optional. The Third Party Premium is fixed by the IRDAI (Insurance Regulatory and Development Authority of India), whereas insurance companies are free to fix the Own Damage Premium as per their business requirement.

3. Applied on Net Premium after Rebates
You may be eligible for some underwriter's discount(s) from your insurance company.

This rebate, if any, is first deducted from the Basic Own Damage Premium.

Thereafter, the relevant No Claim Bonus percentage is applied, to compute the "net" premium payable towards Own Damage Cover.

To this you have to add the Third Party Premium (and rider premiums, if any) to arrive at the total premium payable to get a Comprehensive Insurance Cover for your vehicle.

Wow! I got a huge discount on my car insurance premium... yet again...

4. No Claim Bonus is for the insured person, not the vehicle per se
This distinction is really important.

The person insured under the policy is entitled for the No Claim Bonus, and not the vehicle.

In other words, when you sell your old vehicle, you continue to enjoy the same percentage of No Claim Bonus, as discount on the insurance premium of the new vehicle that you purchase.

And, the insurance premium for the old car will now depend on the percentage of No Claim Bonus enjoyed by the purchaser of your old vehicle.

Important Exception:
If upon the death of the insured person, the vehicle is transferred to his/her spouse, children or parent, the No Claim Bonus is passed on to the new owner.

5. Validity of No Claim Bonus
Suppose you sell your old vehicle, but do not buy a new one immediately.

If that be so, please don't forget to take the No Claim Bonus Certificate from your insurance company.

This certificate is valid for three years.

In other words, you can carry forward the No Claim Bonus and get discount on the insurance premium on the new vehicle, purchased any time during the next three years.

6. New insurer to allow the same No Claim Bonus
If you wish to transfer the insurance of your vehicle from one insurance company to another, you are allowed to claim the same discount in your insurance premium on account of no claim, as eligible with the previous insurer.

As a proof thereof, you will have to either furnish the renewal notice with No Claim Bonus or a letter from the old insurer confirming the percentage of No Claim Bonus enjoyed by you.

7. No evidence of No Claim Bonus entitlement
Suppose, you cannot produce the proof from your previous insurer, that you are eligible for a certain No Claim Bonus.

No problem.

Even a declaration to the effect will be sufficient. You will, however, have to undertake to forfeit all such benefits if later it is found that your declaration was false.

In the regards, as per law the new insurer has to write to the old insurer, within 21 days, to verify your claim. And the old insurer has to, as per law, reply within 30 days. 

8. Transfer of No Claim Bonus on company leased car
Many companies take vehicles on lease and give them to their key personnel as a perquisite. At the end of the lease period, the vehicle is transferred to the said employee at depreciated price.

Even though the vehicle is owned by the company during the lease period, you can transfer the No Claim Bonus accrued on the policy after the change of ownership in your name.

In this regards, a letter would be required from the employer confirming that the said vehicle was "allotted to and exclusively operated" by you during the period the No Claim Bonus had accrued.

9. No Claim Bonus lapses after 90 days
You must renew your motor insurance policy within 90 days (except as in Point 5 above) of its expiry.

If not, the No Claim Bonus will not be allowed thereafter.

10. No Claim Bonus earned abroad
If you are entitled to any No Claim Bonus earned outside India, you can utilize the same benefit for a new policy taken in India.

You will, naturally, have to produce documentary evidence for the same. Secondly, you must buy the new motor insurance policy in India within a period of three years from the expiry of the overseas insurance policy.

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