Imapact of no claim bonus on car insurance premium calculation (1)

Impact of No-claim Bonus on Premium Calculation

Before you claim for smaller expenses have a look at the impact of no-claim bonus on the premium calculation of your car insurance.
Imapact of no claim bonus on car insurance premium calculation (1)Although the cost of insurance for your vehicle continues to rise every year, most insurance companies offer a unique proposition in each insurance called the No Claim Bonus (NCB). As the term suggests, this is the discount offered to you by insurance companies the next year, if you have not made any claim in the current year. Strictly speaking, NCB can shave off a significant amount from your premium and bring your premium cost down. If you state your driving skills to be extremely safe and smooth, you will be mighty pleased to see the NCB column on your insurance papers.

No Claim Bonus Discount Calculation

Many experts advise buying a comprehensive insurance cover for your car. In case of comprehensive insurance, the total premium of insurance depends on two factors: own damage premium and the third-party cover (also referred to as the liability cover). It is generally seen that own damage premiums typically fall between 60% – 90% of the total premium amount. The No Claim discount is always calculated on the own damage premium and it is why No Claim Bonus is an excellent way to bring your premium cost significantly down.

No Claim Bonus for Multiple Years

In reality, driving safe would not only protect you against hazardous accidents but will also ease out your financial burden by reducing your yearly premiums cost. NCB is a yearly activity that comes from the first renewal of insurance of your car. NCB can go for two or more years provided you have been extremely vigilant and excellent when it came to driving and have not taken any claim at all in previous years. The below table gives a simplified structure about how an NCB is calculated:

DetailsDiscount on Premium
No claim made during previous 1 year of insurance20%
No claim made during previous 2 years of insurance25%
No claim made during previous 3 years of insurance35%
No claim made during previous 4 years of insurance45%
No claim made during previous 5 years of insurance50%

Thus, you can see that you can save a whopping 50% on your 6th-year premium amount if you have not made any claim in the previous 5 years. Beyond this, you continue to get 50% NCB on your premium amount.

Exponential Impact on Discount

The NCB does not provide you with a discount for the first year’s premium but can provide you with an exponential discount after that for several years. With a smart choice of Insurance Value of your vehicle, you can save significantly through NCBs. The chart below gives you an idea about the tentative saving of your vehicle through NCB.


Insured Declared Value (IDV)Premium without NCBPremium with NCBSavings


Rs. 3,60,000Rs. 11,257Rs. 11,257Nil


Rs. 3,00,000Rs. 9,381Rs. 7,505Rs. 1,876 or 20%


Rs. 2,50,000Rs. 7,818Rs. 5,863Rs. 1,954 or 25%


Rs. 2,20,000Rs. 6,879Rs. 4,472Rs. 2,408 or 35%


Rs. 2,00,000Rs. 6,254Rs. 3,440Rs. 2,814 or 45%


Rs. 1,85,000Rs. 5,785Rs. 2,892Rs. 2,892 or 50%
TotalRs. 11,945

You can see that for a car with an initial IDV of Rs 3,60,000, you can approximately save more than Rs 11,000 on your premium amount in 6 years. Even beyond this, the savings continue to grow since you keep getting 50% NCB for subsequent years as well.

No Claim Bonus – When Do You Lose It

  • As soon as you make a claim for your vehicle in any year, your NCB is set to 0 again. This implies that if you have not made a claim till the third year, you will get NCB of 35% in the fourth year. However, if in the fourth year, you make a claim, whether big or small, your NCB for next year will be set to 0.
  • Another important consideration, you have to renew your policy within 90 days after expiration or else you may lose your NCB.


Your smart choice of IDV and careful and safe driving skills can get you a significant amount of money by way of a No Claim Bonus.