What happens to your no claim bonus when you sell or change your car
Short answer
No claim bonus belongs to you, not the car. It is a discount on the own-damage part of your premium for claim-free years. Sell the car and you can use the bonus on your next one if you tell your insurer and keep the proof. The buyer of your old car does not inherit it.
What is a no claim bonus?
A no claim bonus (NCB) is a reward for a policy year in which you made no claim. It is a discount on the own-damage part of your premium, not on the third-party part. It grows with each further claim-free year, and if you make a claim it is lost for the next policy period. The size of the discount is set by insurers as per their terms, so we do not quote it here.
Who owns it, you or the car?
You do. IRDAI's motor insurance handbook says the bonus is given to the insured and not to the insured vehicle. That is why it can follow you to another car, and why it does not go to the person who buys your old one.
What happens to it when I sell my car?
- The buyer does not get your bonus. The policy can be transferred to the buyer, but not the no claim bonus. The buyer pays the difference for the balance of the policy period.
- You can use it on your next car. The handbook says you can use your bonus on a new vehicle you buy, provided you have not transferred the insurance to the buyer of the old car.
- Tell your insurer promptly. Inform it about the sale and that you want to keep the bonus, and do this within the time limit its terms give. You will also need to surrender the old certificate of insurance as its terms require.
- The new car's premium is adjusted. If the new car's insured value is higher, you pay the difference for the rest of the policy period.
Can I keep it if I change insurer?
Yes, when you change insurer at renewal your bonus comes with you, if you can prove it. The handbook says the proof can be the renewal notice from your current insurer, a letter from that insurer confirming your entitlement, or your expiring policy with a declaration that no claim was made on it.
How can I lose it?
- By making a claim on the own-damage part of the policy. It is lost for the next policy period.
- By letting the policy lapse. A comprehensive policy left to lapse for long enough loses its accrued bonus. The length of time is in the policy wording, so check it. See what to do when a car insurance policy has lapsed.
Questions about no claim bonus
Does no claim bonus apply to the third-party premium?
No. It applies to the own-damage part of the premium only. The third-party part is not discounted for claim-free years.
Do I lose my no claim bonus if I make a claim?
Yes, on a claim under the own-damage part of the policy, the bonus is lost for the next policy period and you start building it again.
What proof do I need to move my bonus to a new insurer?
The renewal notice from your current insurer, a letter from it confirming your no claim bonus, or your expiring policy with a declaration that no claim was made. Ask your current insurer for it before the policy ends.
Do I get the previous owner's no claim bonus on a used car?
No. It belongs to the person who earned it. You start building your own from your first claim-free year.
Sources
- Handbook on Motor Insurance, Insurance Regulatory and Development Authority of India
- Motor insurance, IRDAI policyholder pages
The size of the bonus and the conditions for keeping it are as per each insurer's policy wording. This guide is general information.
Related services
More guides
- How a car insurance claim works, step by stepHow a car insurance claim works in India: what to do first, when a police report is needed, cashless or reimbursement, the survey and the documents.
- Your car insurance has lapsed: what to doWhat to do if your car insurance has expired in India: the legal position, inspection on renewal, what happens to your no claim bonus, and how to restart cover.
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