What is No Claim Bonus in Insurance? Explained Simply

When you buy insurance, the goal is to protect yourself financially in case something goes wrong. But what happens if everything goes smoothly and you don’t make a claim during the policy year? This is where the No Claim Bonus (NCB) comes in.

What is a No Claim Bonus?

A No Claim Bonus is a reward that insurance companies give you for not making any claims during your policy period. Instead of filing claims for minor damages or expenses, if you go claim-free, your insurer reduces your premium when you renew your policy.

Think of it as a discount or reward for being a safe and responsible policyholder.

Where is No Claim Bonus Commonly Used?

• Car/Auto Insurance: This is the most common type. If you don’t claim for accidents or damages in a year, you get a discount on the next year’s premium.
• Health Insurance: Some health policies also offer NCB. Instead of a discount, they may increase your coverage amount at no extra cost if you don’t claim during the year.

How Does No Claim Bonus Work?

Example in Car Insurance:

Let’s say your car insurance premium is $500 a year. If you don’t make any claims this year:

• Next year, you might get a 20% discount = you pay only $400.
• If you stay claim-free for 5 years, the discount can go up, sometimes as high as 50%.

Example in Health Insurance:

Suppose your health insurance covers $50,000 a year. If you don’t use it for a whole year, your insurer might increase your coverage to $55,000 the next year—without raising your premium.

Important Things to Know About NCB

• It resets if you make a claim: If you make even one claim, you usually lose your bonus for the next year.
• It’s tied to you, not your vehicle: In car insurance, if you sell your old car and buy a new one, you can often transfer your NCB to the new vehicle.
• There’s usually a maximum limit: Most insurers cap the NCB at around 50% discount.
• You can protect it: Some insurers offer an “NCB protection add-on,” so you won’t lose your bonus even if you make a small claim.

Why Does No Claim Bonus Matter?

• It saves you money over time.
• It encourages safe driving and healthy living.
• It rewards you for being cautious and responsible.

Final Thoughts

A No Claim Bonus is like a pat on the back from your insurer for not using your policy unnecessarily. Whether it’s a discount on car insurance premiums or extra coverage in health insurance, NCB makes insurance more rewarding in the long run.

If you can afford to handle small expenses out of pocket, avoiding unnecessary claims helps you build a bigger No Claim Bonus—and bigger savings.