Does Filing a Small Claim Always Mean Losing Your No Claim Bonus?

Summary/ TL;DR:

Filing a small claim under the car insurance policy can reset your accumulated No Claim Bonus (NCB) to zero, and eventually increase the premium during renewal. You should compare the cost of minor repairs and the discount you’ll get on renewal premiums due to NCB. Choose an NCB Protector add-on to retain the benefits even if you file a limited number of claims in the policy period.

Introduction

Your car insurance does more than protect your car. It also rewards you for being a safe and responsible driver. This is available through the insurance’s No Claim Bonus feature. If you've been a responsible driver and mindful of your driving skills, you'll qualify for NCB benefits.

You will be eligible for a discount on your premium during renewal through No Claim Bonus. However, one small claim can also have an impact on your NCB. But would it mean you lose the no-claim bonus? Let's find out.

What is No Claim Bonus?

NCB in insurance refers to the discount you receive on the premium if you did not file for any claims during the preceding policy period. It is a reward for maintaining your vehicle and safe driving habits. You could receive significant premium benefits.

The discount on car insurance will keep increasing with each consecutive claim-free year. The maximum bonus can reach up to 50% after five claim-free years. If you file a small claim under the policy, you lose your No Claim Bonus, and it resets to zero. However, if you have a No-Claim bonus protector add-on, you will not lose out on the benefits.

How Much NCB Can You Accumulate?

No Claim Bonus (NCB) is awarded for every claim-free year within the comprehensive or standard own-damage car insurance policy. The standard NCB slab, as per the industry practice, aligned with the guidelines from the Insurance Regulatory and Development Authority of India, is as follows:

• 1 claim-free year: 20% discount
• 2 consecutive years: 25% discount
• 3 consecutive years: 35% discount
• 4 consecutive years: 45% discount
• 5 consecutive years: 50% discount

Key things to note:

• The maximum cumulative benefit is capped at 50%, even if you remain claim-free after five years.
• The NCB belongs to you, the policyholder, not to your vehicle. Therefore, it can be transferred when you buy a new car.

If you accumulate a higher NCB, it will have a greater financial impact when you reset due to a claim.

Will You Lose NCB for a Small Claim?

Yes, you will lose NCB on a small claim, and the accumulated NCB will be reset to zero at renewal. Here are the key things to note:

• The size of the claim doesn't matter.
• If you file a claim under Own Damage, NCB will reset.
• With a No Claim Bonus Protector add-on, you will be allowed to file up to 1-2 claims in a year without losing the benefits.
• If you file a claim under third-party damage and not own damage, your accumulated NCB will remain unaffected.

For more information on standalone damage car insurance, read Standalone own damage car insurance.

How to Decide Whether to File a Small Claim?

Generally, it is advisable not to file a small claim if you can afford the cost of repairs. However, if you're planning to file the claim, here are some key factors to consider:

• Make sure to calculate the repair cost.
• Calculate the impact on NCB on how much premium you'll lose.
• Compare the long-term impact.

You should file an NCB claim only under the following scenarios:

• Major damage due to an accident
• Structural or engine damage
• Theft
• Repair costs exceed NCB benefits.

As for minor scratches, it is advisable not to file a claim and to pay for the repair expenses out of your own pocket. This makes more sense when you have accumulated NCB.

What Mistakes Can Affect No Claim Bonus?

Various factors can affect NCB benefits on car insurance. However, there are specific mistakes that can affect the bonus benefits from the policy details:

• Not transferring the bonus when switching to a new policy.
• Filing for claims under the policy.
• Not protecting the accumulated benefits.
• Missing out on the renewal deadline.

When Should You Avoid Filing a Claim?

Here's when you should avoid filing a claim:

• The cost of repairs is almost equal to the deductible.
• You've accumulated high NCB benefits over the years, which can significantly reduce your premiums.
• Your car has minor damage such as paint chips, small dents or scratches.
• You’ve agreed to a minor settlement with no third-party liability involved.

Does Third-Party Claim Affect NCB?

Typically, filing a claim under third-party insurance doesn't affect your accumulated NCB benefits. You must not claim for your own vehicle damage, and the NCB will remain unaffected. The Insurance Regulatory and Development Authority of India governs the Motor Insurance norms. This clearly distinguishes between own-damage and third-party components. NCB applies only to own-damage insurance.

To understand more about this, read What is Third-party Car Insurance?

How to Transfer NCB?

Since NCB is linked to the policyholder, when you sell your car or switch the insurance, you can transfer the NCB and retain the benefits. Here's how to do so:

• Request your current car insurance company to provide an NCB retention certificate while confirming your claim-free record.
• When you buy new car insurance online or switch insurers, declare the NCB percentage.
• Submit all the relevant documents to the insurer.
• NCB will remain valid for only up to 90 days after policy expiry. Do not delay further, as it may result in the loss of accumulated benefits.

What happens if you make a claim for a car dent?

If you file a claim for something as minor as a dent on your car insurance online, you're likely to lose your NCB benefits. Moreover, the claim settlement may take some time due to inspections. It's better to pay for these small repairs yourself. If you file a claim, you can’t negotiate on discounts for premiums during renewal.

In case of a small accident with bumper damage, can you file the claim?

If the damage repair costs you a significant amount, you may file for a claim. However, if the damage is small, it is advisable to get the repair done out of your pocket. It's financially wiser when your premium discounts on car insurance are significant.

Expert Note

This information is based on standard motor insurance guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI) and commonly followed industry practices. Policy coverage and conditions may vary by insurer.