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No Claim Bonus Explained! For Health and Motor Insurance Policyholders

Most health and motor insurance policyholders do not file a single claim in a policy year. Insurance companies have a provision that rewards those who do not file a claim in a policy year, known as the No Claim Bonus. It is a reward given to the policyholder for every claim-free year.

No Claim Bonus on health insurance policies

In the case of health insurance policies, there are two types of No Claim Bonuses offered – first is a reduction of premium due and second is an increase in sum assured amount the year immediately after a claim-free year.

Example of NCB effects on a health plan

Mr. Kumar had bought a health insurance cover of Rs 3,00,000 in the year 2019. His policy is active and he pays premiums regularly. In 2020, he was not hospitalized at all and made no claims. Therefore, his insurer gave him a benefit of 10% (or as specified) on his coverage amount, which is Rs 3,00,000. Consequently, Mr. Kumar has a total of Rs 3,30,000 (3 lakhs + 10% of 3 lakhs) to claim in case of medical emergencies for the year 2021.

No Claim Bonus on Motor Insurance Policies

For motor insurance policies, No Claim Bonus takes the shape of reduced premiums after every claim-free year. This discount goes up every year (limit is 5 continuous years) provided no claim is filed.

Generally, the No Claim Bonus on premiums can range anywhere from 20% to 50%. This may vary from policy to policy.

No Claim Bonus Protector for Motor Insurance Policies

In a typical insurance policy, if you make even a single claim, your No Claim Bonus for the next year becomes 0%. This means that in order to avail NCB discount, you have to be careful not to make any insurance claims on your policy.

A No Claim Bonus protector protects your NCB in case of claims. An NCB protector add-on cover can prove to be useful as it can provide added financial protection at the time of policy renewal.

Transfer of No Claim Bonus in Motor Insurance Policies

The NCB feature is associated with the policyholder, not with the vehicle. Usually, when policyholders buy a new vehicle, they forget about the accrued NCB of their old vehicle. Thus, they end up paying the entire premium for their new vehicle.

If you have NCB accrued on your old vehicle, you should get the NCB certificate before you dispose of the vehicle and claim the NCB discount on the new vehicle’s insurance premium. This is doable even if you change the insurance provider.

If you have availed the NCB protector with your plan, then that will also be transferred to the new insurance company if you transfer your policy.

Note that NCB benefits cannot be transferred from a two-wheeler policy to a four-wheeler policy and vice versa.

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