No Claim Bonus cuts up to 50% off the own-damage part of your motor premium. And it belongs to you, not to your car. That second half is the part that costs people money. IRDAI’s own Motor Insurance Handbook puts it plainly. NCB “ranges from 20% on the Own Damage premium (and not on Liability premium)”. It “progressively increases to a maximum of 50% based on successive claim free years”. And “NCB is given to insured and not to the insured vehicle”.
So when you sell the car, the discount does not go with it. You keep it. You can carry it to your next car, and you have up to three years to do so. Almost nobody is told this at the point of sale.
How much is the No Claim Bonus at each year?
The scale below comes from the India Motor Tariff 2002, General Regulation 27. Own-damage premium was de-tariffed in 2007. An insurer is no longer legally bound to this exact ladder. In practice the market still quotes it. IRDAI’s handbook confirms both ends of it: 20% at the bottom, 50% at the top. Treat the middle rungs as the standard, not a guarantee. Check the figure printed on your own renewal notice.
| Claim-free record | Discount on own-damage premium | Applies to | Basis |
|---|---|---|---|
| No claim in the preceding full year | 20% | All classes of vehicle | IMT 2002 GR.27(b) |
| No claim in the preceding 2 consecutive years | 25% | All classes of vehicle | IMT 2002 GR.27(b) |
| No claim in the preceding 3 consecutive years | 35% | All classes of vehicle | IMT 2002 GR.27(b) |
| No claim in the preceding 4 consecutive years | 45% | All classes of vehicle | IMT 2002 GR.27(b) |
| No claim in the preceding 5 consecutive years | 50% | All classes of vehicle | IMT 2002 GR.27(b) |
You become entitled to NCB only when a policy is renewed after running its full 12 months. A mid-term switch earns you nothing. And one claim resets the ladder to nil at the next renewal, whatever rung you had climbed to.
Why is 50% off not 50% off your premium?
This is the misreading that sells a lot of unnecessary policies. Your motor premium has two parts. Third-party liability is priced by IRDAI and is compulsory. Own damage covers your own car and is the part you can shop for. NCB touches the own-damage part only.
On an older car with a low insured declared value, the own-damage premium can be the smaller half of the bill. A 50% discount on the smaller half is not a 50% discount on the bill. So a quote that looks dramatically cheaper because of a big NCB is often cheaper by a modest rupee amount. Compare the final payable figure, including the 18% GST, not the discount percentage. Our page on third party versus comprehensive cover explains how the two halves are priced. Our page on IDV covers what sets the own-damage base.
How do you keep your NCB when you sell the car?
The tariff is specific here, and the sequence matters. GR.27(d) says it “shall follow the fortune of the original insured and not the vehicle or the policy”. Transfer the policy with the car and yours is gone. The buyer’s own record then decides their discount.
To keep it, do not hand over the policy. Tell your insurer you are selling and that you wish to retain the NCB. Ask for an NCB retention certificate in writing. Then apply it to your next car. It must be the same class of vehicle. A car’s NCB does not move to a two-wheeler.
Say you sell and do not buy immediately. GR.27(g) still allows the bonus on a later policy. The new cover must start within three years of the old one expiring. The rate you get back is the rate you had earned at that last expiry. Outside that three-year path, GR.27(i) is blunt: no NCB is allowed if a policy is not renewed within 90 days of expiry. A lapse of three months and one day wipes out a discount that took five years to build.
| Situation | What happens to the bonus | Rule |
|---|---|---|
| You make any own-damage claim | Drops to nil at the next renewal | IRDAI Motor Insurance Handbook |
| You sell the car and transfer the policy with it | You lose it; the buyer gets their own entitlement | IMT 2002 GR.27(d) |
| You sell the car and retain the policy | You keep it for a substituted vehicle of the same class | IMT 2002 GR.27(d) |
| You switch insurer at renewal | Carried over on proof from the previous insurer | IMT 2002 GR.27(f) |
| You let the policy lapse for over 90 days | Lost, unless the three-year sale route applies | IMT 2002 GR.27(i) |
| You had earned NCB on a policy abroad | Allowed in India within three years of that policy expiring | IMT 2002 GR.27(h) |
| The insured dies and the family keeps the car | Passes to the spouse, children or parents who take custody | IMT 2002 GR.27(d) |
Should you claim for a small dent or pay for it yourself?
Do the arithmetic before you call the insurer, because the loss is not one year of discount. It is the whole ladder. Claim at 50% and you drop to nil. Then you climb back through 20, 25, 35 and 45 over four more renewals. The real cost is the extra premium across all five years. Add your compulsory deductible on the claim itself.
A rough test works well. Add up the own-damage premium at your current discount, over the next five renewals. Do the same at nil. Is that gap larger than the repair bill minus your deductible? Then pay for the repair yourself. On a small car the own-damage premium is modest, so the crossover is low. A ₹8,000 bumper repair is usually not worth claiming. On a high-IDV car the maths flips, because the own-damage premium is large and so is the rupee value of the discount.
One more thing decides it. Claiming affects your rating with the insurer beyond the tariff scale, since underwriters price repeat claimants differently at renewal. Read the motor claim process before you decide. Compare quotes on car insurance at the same time.
Is an NCB protection add-on worth buying?
Sometimes, and it is one of the few motor add-ons that can pay for itself. NCB protection lets you make an agreed number of claims in a year without the bonus resetting. IRDAI has approved these covers as filed products, so the terms differ by insurer rather than following a common rule.
Read the conditions before you buy, because they are narrow. Most versions cap the protected claims. Most exclude total loss and theft. Most need an unbroken renewal with the same insurer. Several also require you to already hold a minimum NCB level. The add-on earns its keep at 45% or 50%, on a car with a high own-damage premium, driven in heavy traffic. It is poor value on a low-IDV car. There the bonus you protect is worth a few hundred rupees a year.
Frequently asked questions
Can I transfer my NCB to a new insurance company?
Yes. GR.27(f) allows the new insurer to give you the same rate the previous one would have. You need evidence. The IRDAI handbook says it can be “a renewal notice or a letter confirming the NCB entitlement from the previous insurer”. If you cannot produce either, the tariff allows a signed declaration instead. The new insurer must then write to the old one for confirmation. So a missing certificate slows the switch. It does not block it.
Does NCB apply to third-party insurance?
No. The IRDAI handbook is explicit that NCB applies to own-damage premium “and not on Liability premium”. A standalone third-party policy carries no NCB. On a cheap old car, liability is most of the bill. So a big NCB percentage looks better than it is.
I have a two-wheeler and a car. Do the bonuses combine?
No. NCB is earned and applied per policy. GR.27(d) permits a substituted vehicle only of the same class. A car’s record does not help your bike renewal, and the reverse is also true. Both climb independently, so a claim on one leaves the other untouched. See our page on bike insurance for how the two-wheeler side is priced.
My policy lapsed by two months. Have I lost the discount?
Probably not. GR.27(i) draws the line at 90 days, so a two-month gap is inside it. Expect a vehicle inspection before fresh cover is issued. Expect to pay for it. Renew now, not later. At 91 days the bonus is gone, and that is not negotiable.
Does health insurance NCB work the same way?
No, and the two should not be confused. In motor insurance the bonus is a discount on premium. In most Indian health policies the benefit raises your sum insured instead. That comes at no extra cost, up to a stated ceiling. The rules there come from the individual product filing, not from the motor tariff.
Sources
- IRDAI, Motor Insurance Handbook. Primary. Quotations above are verbatim from this document, read on 6 September 2026.
- India Motor Tariff 2002, General Regulation 27 (No Claim Bonus), issued by the Tariff Advisory Committee. The five-step scale and the transfer, lapse and retention rules are quoted from GR.27(b) to GR.27(j). Own-damage premium was de-tariffed with effect from 2007, so the scale is market practice today rather than a binding rate.
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