No Claim Bonus
A benefit given for claim-free policy years, as a premium discount or extra cover.
In motor insurance NCB reduces the own-damage premium in steps from 20% up to 50%. In health insurance it usually increases the sum insured instead, often 10% to 50% cumulatively.
Why No Claim Bonus matters when comparing products
No Claim Bonus (NCB) is an important consideration when comparing insurance products in India, as it directly impacts long-term costs or coverage. For motor insurance, a higher NCB reduces premiums significantly over time, while in health insurance, it can substantially increase the sum insured without additional cost. Understanding NCB's mechanics helps individuals assess the true value and financial implications of different policies beyond the initial premium.
Illustrative example
Consider a car insurance policy with an Own Damage premium of ₹10,000. After one claim-free year, an individual might receive a 20% NCB, reducing the premium to ₹8,000 for the next year. If a health insurance policy has an initial sum insured of ₹5,00,000 and offers a 10% NCB, it would increase the sum insured to ₹5,50,000 after a claim-free year, without increasing the premium.