NCB Calculation & Transfer Rules
How No Claim Bonus rewards claim-free years with a discount on the own-damage premium: the 20% to 50% scale, the effect of a claim, the 90-day renewal window, and how the bonus moves to a new vehicle or insurer.
What NCB is
No Claim Bonus (NCB) is a discount on the Own Damage (OD) premium, given at renewal to a policyholder who made no claim during the policy year. Each further claim-free year moves the discount one step up a fixed scale.
It applies to the OD premium only. Third-party premium rates are notified by the Central Government in consultation with IRDAI and do not attract NCB, so that part of the premium is paid in full whatever the claims record.
The scale and the reset
The discount is 20% after the first claim-free year, 25% after the second, 35% after the third, 45% after the fourth and 50% after the fifth claim-free year and every year after. Fifty per cent is the maximum.
A claim during a policy year takes the NCB to nil at the next renewal, whatever level had been reached, and the policyholder builds it again from the first step. A claim therefore has a cost beyond the repair itself: the discount forgone at later renewals.
An NCB Protect add-on keeps the accumulated bonus from resetting after a claim. How many claims are protected, often one in a policy year and sometimes more, is set by the insurer's terms.
Whose bonus it is
NCB belongs to the policyholder, not the vehicle. When the owner replaces the car, the bonus can be transferred to the new vehicle; it does not pass to the buyer with the old one.
It can also be carried to a new insurer, which needs proof: a copy of the previous policy showing the NCB percentage, or an NCB confirmation (entitlement) letter from the previous insurer.
The 90-day window
If a policy expires, the NCB is retained provided the policy is renewed within 90 days of expiry; after that it lapses.
This is a window for the bonus, not a grace period for cover. The vehicle is uninsured throughout the gap, and driving without third-party cover is an offence.
Rules at a glance
The bonus follows the owner
Lakshmi, 45, a school principal in Kochi, has five claim-free years and 50% NCB on her hatchback. She sells it to a colleague, buys a sedan and insures it with a different insurer.
She gives the new insurer her previous policy copy showing the NCB, or a confirmation letter from her previous insurer, and the 50% applies to the sedan's own-damage premium. Her colleague cannot use the bonus on the hatchback: it was Lakshmi's, not the car's.
What a claim costs in bonus
- Base OD premium before NCB: ₹16,000, assumed unchanged each year for arithmetic only.
- After three claim-free years the NCB is 35%: ₹16,000 × 0.65 = ₹10,400.
- If the fourth year is also claim-free, the NCB rises to 45%: ₹16,000 × 0.55 = ₹8,800.
- If a claim is made in the fourth year, the NCB becomes nil and the next OD premium is ₹16,000.
- Difference at that renewal = ₹16,000 − ₹8,800 = ₹7,200.
Result. The claim means paying ₹16,000 instead of ₹8,800 at the next renewal, ₹7,200 more, with the bonus restarting at 20% after the next claim-free year.
Key points
- NCB is a discount on the own-damage premium only, never on the third-party premium.
- The scale is 20%, 25%, 35%, 45% and 50% for one to five or more consecutive claim-free years.
- A claim resets NCB to nil at the next renewal unless an NCB Protect add-on applies.
- NCB belongs to the policyholder and can move to a new vehicle or a new insurer, with proof.
- NCB survives a lapse if the policy is renewed within 90 days, but there is no cover during the gap.
Common misunderstandings
- NCB is not a discount on the whole premium; it reduces the own-damage part only.
- The 90 days are not a grace period for insurance; the bonus is preserved, but the vehicle has no cover until the policy is renewed.
- NCB does not stay with the car when it is sold; it stays with the policyholder who earned it.
- NCB Protect is not unlimited; the number of claims it shields is fixed by the insurer's terms.
Questions people ask
I have 50% NCB and a base OD premium of ₹20,000. What do I pay?
₹20,000 × (1 − 0.50) = ₹10,000 for the own-damage part. The third-party premium is added in full.
I claimed once after several claim-free years. Do I drop just one step?
No. Without an NCB Protect add-on the bonus goes to nil at the next renewal, whatever level it had reached.
My policy expired six weeks ago. Is the NCB gone?
Not yet: renewal within 90 days of expiry retains it. But the vehicle has had no cover for those six weeks.
What this lesson relies on
- India Motor Tariff — No Claim Bonus provisions, as carried into current motor policies
- Motor Vehicles Act, 1988 — section 146 (compulsory third-party insurance); third-party premium rates notified by the Central Government in consultation with IRDAI
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.