If you have been paying insurance premium on your car year after year without claiming for any accidents, then probably you have a chance to reduce your motor insurance cost on your next car purchase.

N K Kedia, director marketing, Iffco-Tokio General Insurance, said, “There are many companies that reward customers by offering large discounts to continue their insurance. If one transfers his old insurance to the new vehicle, one can avail the no claims bonus (NCB) and reduce the premium burden.”

S K Sethi, chief executive office, RIA Insurance Brokers, and vice-president and director of Insurance Brokers’ Association of India, said the no claims bonus can be carried over by car owners for three years after selling the old car. “The no claims bonus is a benefit given to car owners who have good history and who were not involved in any kind of major accidents. One can reduce the premium whenever the owner is purchasing a new car subject to transfer of his old insurance premium. The person can avail this benefit till three years after he has sold his old car,” Sethi said.

No claims bonus, as the term suggests, is a discount given by insurance companies at the time of annual renewal of car insurance for having made no claims during the year when the policy was in operation. The discount is paid on the own-damage part of the premium on your policy renewal. This bonus, however, is offered mostly if the motor insurance policy is renewed within or before the expiration date of the previous policy.

If you have made no claim in the first year, you get a bonus of 20 per cent; for two consecutive years, the bonus is 25 per cent; for three consecutive years, it’s 35 per cent; for four consecutive years, 45 per cent, and for five consecutive years, the bonus is 50 per cent. It is offered up to a maximum of 50 per cent.

Anil Chopra, chief executive officer, Bajaj Capital, a large distributor of insurance products of companies, said, “No claim bonus is given to the policyholders by the insurers as a reward for not making a claim under the policy. If you are insuring with the same insurer, you can claim the no claims bonus as your right. However, if you move to a new insurer, it is the discretion of that particular insurer to grant the no claims bonus. Generally, most insurers grant no claims bonus in such cases.” However, an important fact one must remember is that if you make an insurance claim, the no claims bonus reduces to nil on renewal.

For instance, let's say that you have had three consecutive claim-free years and you availed a 35 per cent no claims bonus. Now, in the fourth year, you have an accident and you make a claim. When you renew your policy in the fifth year, you do not get any discount; you have to pay the full premium.