What is No Claim Bonus (NCB) in Vehicle Insurance?

What is No Claim Bonus in Vehicle Insurance?

When discussing vehicle insurance, one topic that cannot be overlooked is the No Claim Bonus (NCB). That's why we at Motor Guide thought to discuss it. This is truly like a wonderful gift you receive.

Simply put, a "No Claim Bonus" is a special discount given to you by the insurance company when you renew your insurance for the following year, provided you did not make any claims during your vehicle insurance period.

How Does It Work?

If you drive your vehicle very carefully throughout the year and do not ask the insurance company for any money due to a small or large accident, it results in a profit for the insurance company. That is why they offer you this discount to encourage you. Typically, if you do not make a claim in the first year, you can receive a discount of about **20%** on the next year's insurance premium. Furthermore, if you do not make any claims the following year as well, this discount percentage will increase (e.g., 25%, 35%, and so on). This can continuously increase over a number of years up to a high value like **50%**. In many insurance companies, this discount has a maximum limit, such as 60% or 70%.

Protecting Your NCB

Since NCB is a very valuable discount, it is important to be mindful of losing it. If you file an **Own Damage Claim** under your insurance during the policy period, your entire NCB discount will be lost, and you will have to restart at 0% or the first tier (e.g., 20%) in the following year. Typically, your NCB is not affected by a claim that only involves damage to a third party, even if you are at fault.

Also, if you have continuously earned NCB for more than 5 years, according to the rules of some insurance companies, even if you make a claim, your NCB will not be entirely lost, but only a small amount (e.g., three years' worth of discount) will be reduced, allowing you to retain the rest. This varies from company to company.

NCB Protection Add-ons

Some insurance companies offer special additional covers (**Add-ons**) where, for a very small additional premium, your NCB at a high percentage like 50% is protected even if you make one claim per year. This is very useful for those with a high NCB.

Other Key Advantages of NCB

• **Portability:** Another advantage of NCB is the ability to transfer the NCB discount you have earned to the insurance premium of a new vehicle, even if you sell the old vehicle and buy a new one.
• **Owner-based:** This discount belongs to the **owner of the insurance policy**, not the vehicle.
• **Company Variation:** This varies from insurance company to company.
• **Protection Facility:** Many insurance companies in Sri Lanka now offer special facilities (Add-ons) to protect your NCB under a small additional payment. This is especially valuable for those who have earned a high NCB percentage like 50%.
• **Exempt Claims:** Often, claims made only for a cracked front or rear windscreen, without other damage, do not affect the NCB.
• **Natural Disaster Coverage:** Some companies offer special coverage where the NCB is not lost even if a claim is made for damage caused by a natural disaster.

Points to Remember

• **Calculation Basis:** The basic premium is calculated based on the current market value of your vehicle, and only then is the NCB discount deducted. Therefore, even if you have a 50% NCB, the amount you pay might slightly increase if the vehicle's value has increased.
• **Deductible:** Even if you make a claim, you will have to pay the "Deductible" (the minimum amount borne by the vehicle owner). But if you use an NCB Protection Add-on, you can pay the Deductible and save your NCB.
• **Non-Usage:** Even if you have not used your vehicle for a year, you may be entitled to the NCB upon renewal of the insurance.

We hope this information has given you a clear understanding of the value of the No Claim Bonus and how to protect it.