All About NCB in Multi-year Car insurance Policy

1. All About NCB in Multi-year Car insurance Policy.

2. A multi-year car insurance policy is a type of policy in which the premiums for several years are paid at once, in a lump sum amount. A multi-year policy has many benefits for the policyholders, the primary one being that it eliminates the yearly renewal process. Simply pay once and you are covered for the next few years. Due to the unique nature of the multi-year car insurance policy, certain features that are generally present in Motor Insurance Policy work differently in this form of coverage. One such important feature is the No Claim Bonus or the NCB.  In this article, we look at how the No Claim Bonus functions within a multi-year car insurance policy. 

3. The benefit of the no claim bonus  • For the uninitiated, the NCB is a feature offered to policyholders for their diligence in driving. It refers to a discount/bonus given to the policyholder when they do not raise any claims during the policy term. In a regular car insurance policy where the policy is active for a year only, the NCB can be availed on the premiums of the following year. The NCB is cumulative in nature - the longer you do no raise a claim, the higher is the discount you are eligible for.  • The discount you can get for the first claim-free year could go up to 20% and then keep on increasing until it reaches the maximum discount limit set by the insurer. Most insurers have a limit of 50% beyond which the discount percentage does not increase.  • However, in a multi-year policy, the premiums are paid for several years, so the process of getting a discount on your premium is different. The NCB in a multi-year car insurance policy is decided by the number of claims made during the policy term. So, the lower the number of claims, the higher will be the NCB. Some insurers have a very specific structuring of the NCB for multi-year car insurance. Here, it is not just the number of claims made but also when they were made during the policy term that makes a difference on the NCB.

4. In a single-year car insurance policy, the policyholder could lose their entire accumulated NCB of the previous years if even a single claim is made. So, in many ways, the multi-year car insurance is beneficial when it comes to NCB as one retains their NCB even after having made a claim.  • Do bear in mind that this structuring may differ between insurers.

5. Risk losing NCB if policy is not renewed on time  • It is to be noted that the NCB gets transferred from one policy term to another policy term only if the car insurance renewal is done on time. If the policy is not renewed even within the grace period from the expiry date of the previous policy term, the NCB is lost.  • Since there is no yearly renewal process within a multi-year car insurance policy, the risk of losing the NCB in this manner goes away.  • We hope this article has helped improve your understanding of how NCB works in multi-year car insurance.

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