When you buy an insurance policy, you are essentially paying a premium for protection against a potential future event. If that event does not occur and you do not make any claims during the policy year, the insurance company rewards you for being a safe driver or for maintaining a healthy lifestyle. This reward is known as the No Claim Bonus. For any owner of a vehicle or a health insurance policy in 2026, it is essential to understand what is a No Claim Bonus (NCB) in health and motor insurance. The NCB is a significant benefit that can either reduce your future premiums or enhance your coverage, making it a valuable feature of your policy.
What is a No Claim Bonus (NCB)? A Simple Definition
A No Claim Bonus (NCB) is a reward that an insurance company gives to a policyholder for not making any claims during the entire term of the policy, which is usually one year. It is essentially a discount on the premium for the next policy year or an enhancement of the sum insured, depending on the type of policy. The NCB is the insurer’s way of incentivizing good behavior—be it safe driving in the case of motor insurance or staying healthy in the case of health insurance. The bonus is cumulative, meaning it increases for every consecutive claim-free year, up to a certain maximum limit.
No Claim Bonus in Motor Insurance
In motor insurance, the NCB is a straightforward discount on the ‘Own Damage’ (OD) component of your premium when you renew your policy. The OD component is the part of the premium that covers damage to your own vehicle. The NCB does not apply to the ‘Third-Party’ (TP) liability component of the premium, which is mandatory and fixed by the IRDAI. The NCB discount increases with each consecutive claim-free year.
How NCB Works in Motor Insurance:
The NCB slab is standardized across all general insurance companies in India.
| Consecutive Claim-Free Years | NCB Discount on Own Damage Premium |
|---|---|
| After 1st year | 20% |
| After 2nd year | 25% |
| After 3rd year | 35% |
| After 4th year | 45% |
| After 5th year | 50% (Maximum Limit) |
Important Point: If you make even a single claim during a policy year, your accumulated NCB drops back to zero at the next renewal.
No Claim Bonus in Health Insurance
In health insurance, the NCB works a bit differently. Instead of giving you a discount on the premium, most health insurance companies reward you by increasing your sum insured for every claim-free year, while keeping your premium the same. This is known as ‘Cumulative Bonus’.
How NCB Works in Health Insurance:
The percentage of increase in the sum insured varies from one insurer to another. A common structure is:
- Bonus Percentage: The sum insured increases by a certain percentage (e.g., 10%, 25%, or even 50%) for each claim-free year.
- Maximum Limit: This increase is subject to a maximum limit, which is often 50% or 100% of the original base sum insured.
Example:
- You have a health policy with a base sum insured of ₹5 lakh.
- Your policy offers a 20% cumulative bonus for each claim-free year, up to a maximum of 100%.
- After the first claim-free year, your sum insured for the next year becomes ₹6 lakh (₹5 lakh + 20% of ₹5 lakh).
- After the second claim-free year, it becomes ₹7 lakh, and so on, until it reaches the maximum of ₹10 lakh.
The best part is that in most modern health policies, your accumulated bonus does not drop to zero if you make a claim. It may only reduce by one slab. This is a significant advantage over motor insurance NCB.
Key Features of No Claim Bonus
- NCB belongs to the Policyholder, not the Vehicle: In motor insurance, the NCB is linked to you, the owner-driver, not the car. This means if you sell your old car and buy a new one, you can transfer your accumulated NCB to the new car’s policy. This is a form of portability benefit.
- NCB Protection Cover: For motor insurance, you can buy an add-on rider called ‘NCB Protection Cover’. By paying a small extra premium, this cover allows you to make one or two small claims in a year without losing your accumulated NCB.
- Timely Renewal is Key: You must renew your insurance policy on time or within the grace period (usually 90 days for motor insurance) after its expiry to keep your NCB intact. If you fail to renew within this period, your NCB will lapse.
Frequently Asked Questions (FAQs)
1. What happens to my motor insurance NCB if I make a claim?
If you make an Own Damage claim during your policy year, your accumulated No Claim Bonus will reset to 0% at the time of your next policy renewal. You will then have to start accumulating it all over again from the first claim-free year.
2. I am selling my old car. Can the new buyer use my NCB?
No, the NCB is not transferable to the new owner of the car. The NCB belongs to you, the original policyholder. You can retain your NCB and apply it to a new car that you purchase by getting an NCB reserving certificate from your insurer.
3. Does making a third-party liability claim affect my NCB in motor insurance?
No. The No Claim Bonus is only affected if you make a claim for damage to your own vehicle (an Own Damage claim). Making a third-party claim (where your vehicle has caused damage to another person or property) does not impact your NCB.
4. In health insurance, does my cumulative bonus (NCB) reduce if I make a claim?
This depends on the policy terms. In older policies, the NCB would drop to zero. However, in most modern policies, the bonus does not become zero. It may either stay the same or reduce by one slab. For example, if you have accumulated a 40% bonus and you make a claim, at the next renewal, your bonus might reduce to 20% instead of becoming zero.
5. Is NCB applicable on a brand new car’s insurance?
No, the NCB starts accumulating only after the completion of the first full year of the policy without any claims. So, for a brand new car, the NCB is 0%. However, if you have an existing NCB from an old car that you have sold, you can transfer that NCB to your new car’s policy and get a discount from the first year itself.