Article - What is a no-claim bonus for a motor insurance policy?

It is a benefit for those who have not claimed insurance during the preceding year of cover. It means the premium they would pay in the following year would be lower.

It can be availed under the comprehensive motor insurance policy. The policy covers loss or damage to the vehicle insured and third-party liability.

What are the conditions applied?
The no-claim bonus, however, is applicable only to the ‘own damage’ part of the premium, which is 80 per cent of the policy premium. Third-party damage premiums make up the remaining 20 per cent.

Once insurance claim is made, your no-claim bonus benefit is back to zero. The next premium will be higher, since it will not include the amount of no-claim benefit you enjoyed earlier.

However, some insurers now offer an add-on cover, which protects the policyholder’s no-claim bonus. For instance, a policyholder having taken an add-on cover would retain his 20 per cent no-claim bonus, despite having made an insurance claim in the same year.

How can you save?
The discounts on car or two-wheeler insurance starts at 20 per cent in the second year, and goes up to 50 per cent in the sixth year. This means, a saving of a minimum Rs 2,400 (at 20 per cent) to a maximum of Rs 6,000 (at 50 per cent) on a premium of Rs 12,000 for a car insurance policy. The no-claim bonus rate is the same across all insurers.

In case your vehicle gets damaged, get an estimate for the repairs. If the no-claim bonus amount you stand to forfeit in the forthcoming years exceeds the estimated amount you spend on repairing the vehicle, it makes sense not a raise a claim and pay for the damage yourself.

Why opt for it?
Besides discounts in premiums, you can save on the first premium of a new vehicle, subject to certain conditions. Since the no-claims feature is linked to the insured and not the vehicle, you can not only transfer your no-claim bonus from insurer to insurer, but also to a new vehicle of the same type. For instance, you can transfer a no-claim bonus of an old two-wheeler to a new two-wheeler only, and not a four-wheeler.

However, the policyholder needs to have sold his old vehicle for a new one and also have accumulated a no-claim bonus.

Source - Business-Standard.com