Sameer sold his three year old Swift Dzire and bought Figo recently. He did some hard bargain for a better deal on his new car as also the old. But, Sameer failed to check a key aspect of the motor insurance policy which would have saved him a lot more money.

How many of you know that the no-claim bonus (NCB) on a motor insurance policy is transferrable? No-claim bonus is the incentive given to the policy holder for his safe driving habits. So, the insured can carry his accumulated NCB with him even when the vehicle is sold. By failing to transfer the NCB to the new policy, the policyholder stands to lose. Sample this:

A new Figo's cost works out to Rs 4.3 lakh (model: petrol ZXI) and the first year's premium on the car would be around Rs 16,000.

Had Sameer transferred the no-claim bonus on his old car to his new vehicle, he could have got a discount of 35 per cent (standard rate of benefit on the fourth year for three no-claim years) in the first year's premium- which works out to Rs 5,600!

With every other no-claim year, Sameer's no-claim bonus benefit would have increased upwards from 35 per cent (by 5 per cent every year to a maximum of 50 per cent). But, as he didn't transfer his NCB, for no-claim in the first year of his new car, he will be eligible for a discount of only 20 per cent on the premium in the second year.

Read on to know how the no-claim bonus can work in your favour.

Get the concept

NCB is the incentive given to the owner of the car (the policy holder) and can be accumulated by him over a period of time.

The discount that can be availed against NCB increases from 20 per cent (in the second year of the policy following a full year of no-claim) and goes up to a maximum of 50 per cent in the sixth year after five consecutive years of no-claim on the policy.

The NCB benefit is adjusted against the Own Damage premium under the policy. What does this mean?

A comprehensive motor insurance policy will cover third party liability- damage to a third person's life or the third person's vehicle, and also Own Damage - damage to the policy holder's vehicle.

The premium towards third party cover is however only 20 per cent of the total premium cost, the balance goes towards the own damage cover.

The Own Damage premium is very high in the initial years of the policy as it is calculated on the IDV. IDV is the Insured Declared Value, which is the price of the vehicle adjusted for depreciation for the number of years it has been used. So, the higher the discount you get in the initial years of the policy, more you will benefit!

However, before making a claim on the insurance policy think for a while on whether that claim is higher than the no-claim benefit that you are going to forego and then proceed.

Procedure

As said earlier, the no-claim benefit is for you - the policy holder - and hence can be transferred when the vehicle is sold.

When you sell a vehicle, the buyer will insist on getting the insurance papers transferred on his name.

While getting the paper work done, you should get the NCB certificate from the insurer and it will be an evidence to your no-claim bonus entitlement says Mr Karan Chopra, Head – Retail Business, HDFC ERGO General Insurance Company.

The subsequent policy however need not necessarily be taken from the same previous insurer. With the NCB certificate you can claim the benefit from any insurer.

The no-claim bonus can be utilised within three years of selling the vehicle, says Mr Vijay Kumar, Head of Motor Insurance, Bajaj Allianz.

Also keep in mind the fact that if you do not renew the insurance policy on your vehicle for more than 90 days, NCB will be forfeited!

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