What Is NCB in Insurance?

No Claim Bonus (NCB) is a discount or coverage enhancement that an insurer grants a policyholder for completing a policy year without making a claim. It's the industry's way of rewarding low-risk behavior: the fewer claims you file, the less risk you represent to the insurer, and NCB is how that lower risk gets passed back to you in rupees.

• Why insurers offer it: Claims are expensive to process and pay out, so insurers have a direct financial incentive to encourage policyholders to avoid filing for minor, low-value losses. NCB nudges people to self-fund small repairs or expenses and reserve claims for genuinely significant losses, which keeps the overall claims pool, and therefore everyone's premiums, more stable.
• Who's eligible: Any policyholder who renews their policy without a break and without filing a claim during the previous policy year. NCB is typically available on both individual and family floater policies, though the exact terms vary by insurer and product.
• Why it's called a "bonus": Technically, NCB isn't free money. You still pay a premium every year. It's called a bonus because it's an additional benefit layered on top of your existing coverage: either your premium goes down, or your coverage goes up, without you paying extra for it.
• Bonus vs. cash refund: NCB is never paid out to you as cash. It only ever shows up in one of two forms: a lower premium at renewal, or a higher sum insured at no extra cost. If you don't renew, you don't get anything. The "bonus" only has value inside the policy relationship, not as a standalone payout.

Benefits of NCB in Insurance

• Lower long-term costs. Compounded over several claim-free years, NCB can meaningfully reduce what you pay to stay insured.
• Higher coverage without higher premiums (in health insurance). Your sum insured grows every claim-free year while your premium usually stays flat for that increase.
• Keeps pace with medical inflation. With treatment costs rising close to 14% annually in India, a compounding cumulative bonus is one of the few mechanisms that grows your coverage without requiring you to actively upgrade your plan.
• Rewards disciplined claim behavior. It nudges you to absorb small, manageable expenses yourself and save your claim for when it actually matters.
• Portable. NCB belongs to you as the policyholder, not to the vehicle or the specific insurer, so it can move with you.
• Compounding value. The bonus usually keeps growing each consecutive claim-free year until it hits a cap, so the incentive to stay claim-free gets stronger the longer you go.

How Does No Claim Bonus Work?

NCB follows the same basic lifecycle regardless of whether you're looking at motor or health insurance:

Buy Policy → No Claims → Renew Policy → Earn NCB → Higher Coverage or Lower Premium

A few mechanics apply across almost every insurer:

• Annual renewal: NCB is assessed and applied at each policy renewal, not mid-term. You have to actually renew the policy to receive it.
• Claim-free year requirement: The full policy year has to pass without a claim being filed and paid. Even one claim during that period typically disqualifies you from that year's increment.
• Percentage increase: Each claim-free year typically adds a fixed percentage, either to your discount or your sum insured, on top of what you've already accumulated.
• Maximum limit: NCB doesn't grow indefinitely. Every insurer sets a cap, commonly 50% in motor insurance, and anywhere from 50% to 100% (occasionally higher) in health insurance.
• Claim impact: Filing a claim generally resets or reduces your accumulated NCB, though the exact impact depends on the policy's specific clawback rules.

How Is NCB in Insurance Calculated?

The calculation looks different depending on whether you're looking at motor insurance or health insurance, because the two use different bonus structures, and one is regulator-fixed while the other isn't.

Motor Insurance NCB Calculation

In Indian motor insurance, NCB is a regulator-mandated slab structure that applies only to the own-damage (OD) portion of your premium, never to the third-party (TP) premium, which is fixed independently by IRDAI. These slabs run from 20% after the first claim-free year up to 50% at the five-year mark, and every insurer in India is required to honor the same structure. The typical slab structure is:

Example: If your OD premium is ₹15,000 and you've stayed claim-free for three years, a 35% NCB works out to ₹5,250 off, bringing your payable OD premium down to ₹9,750. The TP portion of your premium is untouched by this calculation.

The 50% cap is a hard ceiling. A tenth consecutive claim-free year still earns the same 50% discount as the fifth; it doesn't keep climbing.

Health Insurance NCB Calculation

Health insurance NCB works differently. Most policies increase your sum insured rather than discounting your premium, and there's no fixed regulatory slab the way motor insurance has one, so the exact percentage is set by each insurer and plan.

On a standard plan, the bonus typically works out to somewhere between 5% and 20% of the sum insured for every claim-free year. Some insurers instead offer this as a premium discount rather than a coverage increase.

Example: If your insurer offers a 10% cumulative bonus, a ₹10 lakh policy grows to ₹11 lakh in coverage after a single claim-free year, with no change to what you pay in premium.

Most standard health plans cap the total cumulative bonus at 50% to 100% of the original sum insured. A smaller number of "Super NCB" or accelerated bonus products go considerably higher: some marketed plans advertise boosts of up to 500% in five consecutive claim-free years, though these usually require an add-on premium and should be verified directly against the policy document rather than assumed from marketing language.

A note before you rely on any of these numbers: Every insurer follows its own NCB structure. The exact percentage per year, the cap, and how claims affect it all vary by product and provider. Always check your specific policy wording rather than assuming the slab or percentage from one insurer applies to another.

Types of No Claim Bonus

There are two broad structures NCB takes, and it's worth knowing which one your policy uses before you decide whether to file a claim.

Cumulative Bonus

Under a cumulative bonus structure, your sum insured increases for every claim-free year, while your premium generally stays the same. This is the more common structure in health insurance. In practice, almost all popular retail health plans in India reward claim-free years with a cumulative bonus, an extra sum insured, while a pure premium discount is comparatively rare.

The appeal here is straightforward: your coverage keeps pace with rising healthcare costs over time, without you paying more for it.

Discount-Based No Claim Bonus

Under a discount-based structure, your premium goes down for every claim-free year, while your sum insured stays fixed. This is the dominant structure in motor insurance, where NCB is expressed purely as a percentage discount on the OD premium.

Some health insurers offer this as an alternative to the cumulative bonus, letting policyholders choose between more coverage or a cheaper renewal, depending on what they need more.

Real NCB Structures Across Indian Insurers

NCB percentages aren't theoretical, and they aren't uniform. Here's how a few real, named products structure it, to show how differently "NCB" can play out depending on the policy you're actually holding.

The gap between a standard plan's 5% annual increase and ICICI Lombard Elevate's guaranteed 100% is enormous, and it's exactly the kind of difference that a headline "NCB included" line in a comparison table won't tell you. The base sum insured, the annual rate, and the cap all need to be read together, not separately.

What Happens to Your NCB After Making a Claim?

This is the part that catches most people off guard: in Indian motor insurance, any OD claim resets your NCB, regardless of fault. Indian motor insurance doesn't distinguish between at-fault and not-at-fault claims for NCB purposes. If someone else hits your parked car and you claim for it, your NCB still resets. Third-party claims, by contrast, don't affect your NCB at all, since they're processed against the other party's TP cover.

In health insurance, the impact is usually softer but still real. Many insurers apply a "clawback" rule, where a claim reduces the accumulated bonus at the same rate it was earned, calculated against your base sum insured rather than your current, bonus-inflated coverage. Some newer policies protect the bonus after a claim, but typically only under specific conditions.

This is exactly why so many policyholders quietly pay for minor repairs or small medical expenses out of pocket instead of filing a claim. The maths on losing a 35% or 50% NCB slab often makes a small claim more expensive than the loss itself.

NCB Protection add-ons exist specifically to soften this. For an additional premium, they let you file a limited number of claims per year, usually one or two, without losing your accumulated bonus. It's worth pricing out whether this add-on costs less than what you'd lose in NCB over the following years if you didn't have it.

Can You Transfer Your No Claim Bonus?

Yes. In both motor and health insurance, NCB generally belongs to you as the policyholder, not to the vehicle or the specific insurer.

• In motor insurance: your NCB travels with you, not the car. Sell the vehicle, buy a new one, and the accumulated bonus comes with you, while the buyer of your old car starts with zero. To carry it over, you'll need an NCB transfer certificate from your existing insurer, which your new insurer is required to honor. The catch is timing: if the gap between your old policy expiring and the new one starting exceeds 90 days, the accumulated NCB is forfeited permanently.
• In health insurance: when you port your policy to a new insurer, continuity of your NCB is generally expected to be honored, though how cleanly this happens in practice varies by insurer. Rather than transferring as a labeled "bonus," most insurers instead let you carry your base sum insured plus earned NCB forward as your new coverage amount when you switch, often preserving continuity so waiting periods don't restart.

Either way, the underlying principle is the same: don't let a policy lapse past the grace or porting window if you want to keep what you've built up.

How to Compare Policies That Offer No Claim Bonus

NCB percentages alone don't tell you much. A policy advertising a bigger headline number isn't automatically the better deal.

The insurer with the highest advertised NCB percentage isn't always the best value once you account for the cap, the base sum insured, and how strictly claims eat into it.

How Pazcare Helps You Get More From Group Health Insurance

Everything above applies to individual and family floater policies, where NCB is tied to your own claim history. If you're an HR leader, CFO, or founder responsible for your company's group health insurance, the picture is different: group policies are priced and renewed as a pooled contract, so the claim-free advantage your employees build up individually doesn't accumulate as a labeled "NCB" the way an individual policy's does. That doesn't mean there's no leverage at renewal, it just means the leverage looks different, and it's easy to leave it on the table without someone actively reviewing it.

Pazcare is an IRDAI-licensed insurance broker that works with organizations across India to evaluate, structure, and manage insurance programs, including group health, personal accident, and life insurance. For HR leaders and founders building out a complete benefits strategy, Pazcare compares terms across insurers, reviews policy wording, and manages claims and renewals through the year, so your renewal pricing reflects your team's actual claims experience rather than a broker's default recommendation.

Talk to a Pazcare insurance expert to review what your current group health policy is really earning you at renewal, or download the Employee Health Matters 2026 guide to see how Indian organizations are structuring their health benefits for the year ahead.