Most people only think about motor insurance when an accident or damage occurs – a dent from a parking mishap, a broken bumper, or water damage during the monsoon. In such situations, filing an insurance claim seems like the obvious choice, since that is what insurance is meant for.
However, many drivers are unaware that even a minor claim can quietly wipe out years of accumulated savings.
Every motor insurance policy comes with a feature known as the No Claim Bonus (NCB) – a reward offered by insurers to customers who avoid making claims. Over time, this benefit can lead to substantial reductions in premium costs. However, despite being one of the most valuable advantages in motor insurance, it remains one of the least understood by policyholders.
Many policyholders end up losing their No Claim Bonus without even realising it. Some forfeit it after filing small claims, while others lose it due to delayed renewals, confusion during policy transfers, or missing paperwork they were unaware was important.
By the time they notice, the discount has already disappeared.
This article is part of Motor Mess, our special series examining the hidden clauses, confusion, and expensive mistakes within India’s motor insurance system – from claim rejections and mis-selling practices to rules that many policyholders only understand after suffering financial losses.
What is a No Claim Bonus (NCB)?
In simple terms, a No Claim Bonus (NCB) is a reward given to policyholders for not raising any claims during a policy year.
“For every consecutive claim-free year, insurers offer a discount on the Own Damage (OD) premium at the time of renewal,” said Saurabh Vijayvergia.
The discount starts at 20% after the first claim-free year and can gradually increase to as much as 50% after five continuous years without a claim.
“These discount slabs are standardised for all general insurers under IRDAI regulations and cannot be negotiated,” Saurabh Vijayvergia explained.
However, the key point lies in where the discount is applied.
“The Own Damage (OD) component usually makes up the larger share of a motor insurance premium. Third-party premiums are fixed by IRDAI and are not eligible for discounts. NCB applies only to the OD premium,” Vijayvergia said.
This means that a policyholder in the 50% NCB bracket effectively pays only half the cost for the portion of insurance that covers damage to their own vehicle.
Why No Claim Bonus Matters More Than Most People Realise
For many drivers, the No Claim Bonus may appear to be just a minor discount, but in reality, it can lead to significant savings over the years.
“The financial benefits are substantial and grow over time in ways that many policyholders only realise when they look at the long-term impact,” said Saurabh Vijayvergia.
He cited mid-range vehicles such as the Maruti Suzuki Brezza and Hyundai Creta as examples.
Over several claim-free years, the No Claim Bonus can gradually increase from 20% to 50% on the own-damage portion of the premium.
“Based on the insurer’s own-damage premium calculation and rating structure, this can result in substantial yearly savings by the fifth year,” Saurabh Vijayvergia explained.
The impact is even greater for premium vehicles.
“In the case of a Toyota Fortuner, where the own-damage premium is considerably higher, the benefits of the No Claim Bonus become far more significant,” he added.
With years of careful driving and selective use of insurance claims, the No Claim Bonus can help policyholders recover a substantial portion of the premiums they pay over time.
“It continues to be one of the most rewarding loyalty benefits in retail motor insurance, although many customers recognise its true value only after unintentionally losing it,” Saurabh Vijayvergia added.
Should You Avoid Small Insurance Claims to Protect Your NCB?
This is where the No Claim Bonus becomes both financially and emotionally complicated.
If your car bumper gets scratched and the repair cost comes to around Rs 7,000 or Rs 8,000, should you file an insurance claim or pay the amount yourself to preserve your No-Claim Bonus (NCB)?
According to Saurabh Vijayvergia, this is one of the most crucial financial choices policyholders face, often without fully understanding its long-term impact.
“Every insurance claim resets the No Claim Bonus back to zero,” he said.
And the financial impact goes beyond just the next policy renewal.
“The real loss is not limited to the immediate discount missed at renewal but also includes the cumulative cost of rebuilding the No Claim Bonus over several years,” Saurabh Vijayvergia said.
For policyholders who have already reached higher NCB slabs, the cost can be significant.
“An Rs 8,000 repair could ultimately lead to a loss of nearly Rs 14,000 in NCB benefits over the next three renewal cycles,” he explained, highlighting a calculation that many insurers fail to clearly communicate while processing claims.
This is why many experts recommend using insurance mainly for major financial losses rather than minor repairs.
“The core principle remains the same regardless of the NCB slab – insurance should be used for large and infrequent expenses. For smaller damages, it is often better to pay from your own pocket, preserve the No Claim Bonus, and consider the insurer as a last resort rather than the first option,” Saurabh Vijayvergia said.
The Part Most People Overlook: Your Claim History Remains on Record
Another aspect many drivers fail to notice is that every insurance claim leaves behind a recorded claims history.
“Frequent claims create a visible track record through industry databases such as the Insurance Information Bureau (IIB),” Saurabh Vijayvergia said.
Insurance companies can refer to this history when determining future premiums and renewal conditions.
“A high claims ratio may result in premium loading or less favorable renewal terms over time,” he explained.
As a result, repeated small claims can affect not only the No Claim Bonus but also the overall future cost of insuring the vehicle.
Why Many Policyholders Lose Their NCB Without Realising It
According to Saurabh Vijayvergia, most cases of No Claim Bonus loss are not caused by insurer mistakes.
“In most situations, the loss can be traced back to decisions made by policyholders themselves,” he said.
One of the most common reasons is delayed policy renewal.
“If a motor insurance policy is not renewed within 90 days of its expiry, the No Claim Bonus is completely forfeited – it is not reduced, but wiped out entirely,” he explained.
This means that a driver who spent five years building up to a 50% NCB level could lose the entire benefit simply by missing the renewal deadline.
Another common reason for losing the No Claim Bonus is filing insurance claims without fully understanding the long-term impact.
“Even a small claim can reset the policyholder’s NCB back to zero,” Saurabh Vijayvergia said.
Confusion during policy or vehicle transfers is another major issue.
When customers switch insurers or purchase a new vehicle, many fail to complete the required formalities to transfer their NCB benefits.
“Transferring the No Claim Bonus requires policyholders to submit an NCB certificate from the previous insurer to the new insurer before the new policy is issued,” Vijayvergia explained.
“If this step is overlooked, the new insurer treats the policy as having 0% NCB,” Saurabh Vijayvergia said.
There is also another lesser-known reason behind NCB loss.
“A road accident in which the other party files a third-party liability claim can also result in the loss of NCB, even if the policyholder has not made any claim for damage to their own vehicle,” he explained.
Who Does the No Claim Bonus Actually Belong To?
One of the most common misconceptions about the No Claim Bonus is whether it belongs to the vehicle or the owner.
“NCB belongs to the policyholder – the individual – and not to the vehicle or the insurance policy itself,” Saurabh Vijayvergia clarified.
This means that if a person sells an old car and purchases a new one, the accumulated NCB can still be carried forward.
“The owner retains the benefit and can transfer it to the own-damage premium of a new vehicle or even to a policy issued by a different insurer,” he explained.
However, since buying a new vehicle and changing insurers often happen at the same time, the required paperwork is frequently overlooked.
“Many people treat NCB transfer paperwork as a small administrative formality, miss it entirely, and end up paying a higher premium without understanding the reason,” he said.
According to Vijayvergia, there is one simple step that can prevent most such issues.
“Proactively requesting the NCB certificate before the new policy is issued is the most effective way to avoid these problems,” he added.
What Is an NCB Protection Add-On – and Is It Worth Buying?
Many insurance buyers are cautious about purchasing add-ons, but Saurabh Vijayvergia believes that NCB protection is one of the few add-ons that provides clear and measurable benefits.
“The NCB protection add-on allows a policyholder to make one claim during the policy year without losing the accumulated No Claim Bonus,” he explained.
In simple terms, the policyholder’s NCB remains intact even after filing a claim.
“The claims record still exists, but the discount itself remains protected,” he said.
For customers with a high NCB percentage, the financial advantage can be significant.
“A policyholder enjoying a 50% NCB on a vehicle with an own-damage premium of Rs 18,000 could lose nearly Rs 9,000 in annual discounts because of a single claim,” Vijayvergia noted.
By comparison, the NCB protection add-on generally costs only around Rs 500 to Rs 1,500.
“At that cost, the overall value calculation generally makes purchasing the add-on worthwhile,” Saurabh Vijayvergia said.
However, he noted that the terms and conditions are important.
“Most NCB protection add-ons cover only a single claim during the policy year. Some insurers also place a cap on the claim amount as a percentage of the Insured Declared Value (IDV), while others may exclude theft-related claims altogether,” he added.
Why Do Insurance Premiums Increase Even After You Earn an NCB?
This is perhaps one of the most common complaints among vehicle owners: if the No Claim Bonus has increased, why has the insurance premium also gone up?
According to Saurabh Vijayvergia, the answer lies in understanding how motor insurance premiums are calculated.
“NCB applies only to the Own Damage (OD) premium and does not reduce any other component of the policy,” he explained.
At the same time, several other factors can increase the overall premium, including:
- higher base rates charged by insurers
- an increase in third-party premiums
- rising costs of add-ons
- different pricing structures for older vehicles
“For older vehicles, the own-damage premium becomes relatively smaller because of a depreciated Insured Declared Value (IDV). In such cases, the third-party premium forms a larger portion of the total cost, reducing the overall impact of the NCB,” he said.
This is why focusing only on the final premium amount can often be misleading.
“The increase usually comes from other components of the policy, but the total premium figure alone hides that distinction,” Vijayvergia added.
What Every Driver Should Review Before Renewing Motor Insurance
According to Saurabh Vijayvergia, the policy renewal stage is the most crucial phase in the No Claim Bonus journey.
“The renewal stage is the point where the risk of losing NCB is the highest,” he said.
He advised policyholders to take the following precautions before renewing their motor insurance:
- verify the NCB percentage before making payment
- avoid allowing the policy to lapse beyond 90 days
- obtain the NCB certificate before switching insurers
- assess whether an NCB protection add-on is worth purchasing
- confirm whether any third-party claim was filed during the policy year
Vijayvergia also cautioned drivers against incorrect NCB declarations while renewing policies online.
“Many online platforms automatically fill in NCB details based on the vehicle’s age or earlier records. If the declared NCB is inaccurate, insurers may reject or delay claims during verification,” he explained.
In some situations, policyholders may later be required to repay claim amounts recovered by the insurer.
On paper, the No Claim Bonus appears to be a simple reward for safe driving and avoiding claims. In reality, however, it plays a major role in determining how much people spend on motor insurance over the years.
And despite its importance, most drivers only realise its value after they have already lost it.
“A policyholder who pays attention only during a crisis will almost always remain at a disadvantage,” Vijayvergia added.