Explained: How NCB on a long-term insurance policy works

The numbers of two-wheeler vehicles in India have increased tremendously in the recent years. Thus, it is but obvious that the riders need to take proper safety precautions, in order to counter the threat of any road-related accidents. Even the government of India has made it mandatory for all the bike owners to have at least two wheeler third party insurance. Hence, no owner of any new vehicle can ride his or her two-wheeler without meeting the minimum criterion of third party cover. But there are a number of riders falling out of the insurance bracket in the recent years. This can be mostly attributed to the hectic lifestyle of today’s world. However, in order to tackle this problem and ensure that all the two-wheeler owners ride their vehicles safely, there are a number of companies which have started offering a long-term motorbike insurance policy. The tenure of these long-term insurance policies for bike owners is around three years.

Now, let’s take the example of Amar and Ramesh, these two have been friends for as long as they could remember, in fact, they even started to ride their motorbikes together. However, they both recently met with an accident, while riding their bikes on their favorite street. Fortunately, the bodily damage was negligible and both of them had suitable add-ons over their Motorbike insurance in order to take care of all the legalities and expenses of any sorts. However, the following year, when both of them went on to renew their insurance covers, Amar had to shell out more amount of money then Ramesh. The reason why Amar had to pay a higher amount of premium can be attributed to the fact that he had opted for a short-term policy cover, whereas Ramesh had a long-term policy cover. Although, both short-term, as well as long-term policy covers, both serve the same purpose of providing comprehensive motorbike insurance. However, the difference between the NCB (no claim bonus) offered by both of them is pretty vast.

An NCB or a no claim bonus is a discount provided by the insurance companies to those who haven’t had a claim of any kind. If you haven’t opted for any claims in the previous year of your policy or in other words, if you have had a claim-free previous year then you are eligible for an NCB (no claim bonus). In the case of long-term insurance, you get a 40% discount when you apply for a renewal and this discount goes on receding with every claim you make. If you have claimed once in those three years then you are eligible for a 30 % discount and if you have claimed twice then you are eligible for 20 % discount. However, in the case of short-term insurance, you lose all the NCB (no claim bonus), even if you claim once. As Ramesh had opted for long-term motorbike insurance, therefore, he still got a discount of 30% even after his making his one claim. But, Amar lost all of his NCB (no claim bonus) as he had opted for a short-term cover.