No Claim Bonus (NCB) Transfer When Selling Your Car in India — Keep It, Do Not Gift It

No Claim Bonus is a discount applied to the Own Damage (OD) portion of your motor insurance premium in each subsequent renewal year where you have not made a claim. It is defined by the IRDAI India Motor Tariff and is mandatory for every general insurer selling motor policies in India. The slab is uniform across insurers — the discount cannot be negotiated up or down by any single company.

Two important points of clarification. First, NCB applies only to the OD premium, not to the Third-Party premium component of the policy. Third-Party premium is set by IRDAI and is the same for every insurer with no discount available. Second, NCB starts from the end of the first policy year — in the very first year of insuring a brand-new car there is no NCB to claim.

Any claim made during a policy year resets the NCB to zero on the next renewal, unless you have purchased an NCB Protect add-on. NCB Protect typically costs 1500-3500 rupees per year and allows one or two claims per year without losing the bonus — a separate add-on from Zero Depreciation and Bumper-to-Bumper.

The IRDAI framework is explicit — No Claim Bonus is earned by the owner of the policy, not stored in the vehicle. This is why when you sell a car, the bonus does not transfer with the vehicle to the new buyer. The new buyer will start from zero NCB on a fresh policy in their name, and you are entitled to carry your accumulated NCB to your next car.

This is different from the RC (Registration Certificate), the FASTag and the pollution certificate, all of which do move with the vehicle. The insurance policy can be transferred in the short term from seller to buyer as an interim arrangement under Section 157 of the Motor Vehicles Act 1988 — but the NCB element does not travel with it. The transferred policy provides cover for the new owner only until the next renewal, at which point the buyer must start their own policy and their own NCB journey.

A corollary worth knowing — if you buy a used car, you do not inherit the previous owner's NCB no matter what the dealer implies. The fresh policy you buy in your name starts at zero NCB. If you are ever sold a used car with the seller's insurance still attached and the dealer claims you also get the NCB benefit, that claim is not valid under IRDAI rules.

An NCB Retention Letter is a formal certificate from your outgoing insurer stating the NCB percentage you had earned at the time of policy cancellation or expiry, and certifying that it can be carried forward to a new policy on a new vehicle within 3 years. Every general insurer in India issues this free of charge — Tata AIG, HDFC Ergo, ICICI Lombard, Bajaj Allianz, Reliance General, Digit, New India Assurance, United India, Oriental Insurance, National Insurance and others all have a standard format.

You request the Retention Letter at one of two moments — when you cancel your existing motor policy ahead of the car sale, or when you are naming the buyer on the interim policy transfer and want to break the policy at renewal. The first route is cleaner and is the one we recommend for most sellers.

The letter is valid for 3 years from the date of policy cancellation or expiry. You can use it to apply the NCB on the next car you register and insure in your name within that window. If you do not buy a new car within 3 years, the Retention Letter lapses and the NCB is considered dead.

Typical turnaround for an email request is 3-7 working days. Some insurers like Digit and ICICI Lombard will issue the letter within 24 hours through their online self-service portal; some of the older public-sector insurers still require a branch visit with the original policy document.

Step 1 — agree the sale of your car to the buyer and finalise the sale price. Keep insurance separate from the deal; do not bundle it into the transfer.

Step 2 — cancel your existing motor insurance policy with your insurer. You do this by sending a cancellation request in writing (email is acceptable for most insurers) citing sale of vehicle as the reason. Attach a copy of the signed Form 29 or sale deed as proof.

Step 3 — in the same email, request an NCB Retention Letter. Specifically state — please issue an NCB Retention Letter confirming my current NCB of X percent so that it can be applied to the new motor insurance policy I will take in my name within 3 years. The insurer will issue the letter by email or physical post within 3-7 days.

Step 4 — the buyer of your old car buys a fresh motor insurance policy in their name from any insurer they choose. They start at zero NCB. They are free to pick the same insurer you used or a different one; your sale does not constrain their choice.

Step 5 — when you buy your next car, share the Retention Letter with the insurer of the new policy. They will apply your NCB percentage to the Own Damage premium on the very first policy of the new car. This is often a 10-25 percent immediate saving on the first-year premium and carries forward if you stay claim-free.

Step 6 — keep the Retention Letter on file in both printed and digital form. If the first insurer who accepted it is not where you end up renewing in year 2, the letter is no longer valid by then anyway (it was used on policy issuance) but keeping it on file simplifies any disputes.

A clear, unambiguous email avoids back-and-forth. Paste this template into your email to your insurer's customer service address, filling in the bracketed details.

Subject — NCB Retention Letter Request — Policy Number [XXXXX] — Vehicle Registration [XX-XX-XX-XXXX]

Body — I am the registered owner of the above vehicle insured under policy number [XXXXX] with your company. I have sold the vehicle to [buyer name] and I am cancelling this policy with effect from [date]. A copy of the signed Form 29 and/or sale deed is attached. Please issue an NCB Retention Letter confirming my accumulated No Claim Bonus of [XX percent] for use on a new motor insurance policy in my name within the next 3 years. Kindly email the Retention Letter to this address and mark a copy to [alternate email] for my records. Thank you for your support.

Attach — scanned RC copy, sale deed or signed Form 29 proving transfer, your current policy schedule document showing the NCB percentage.

If the insurer replies asking for Form 28, 30 or any other vehicle transfer document, see our complete guide to Form 28, 29 and 30 — the same documents serve both the RTO transfer and the insurance NCB retention process.

The rupee value of your NCB depends on the OD portion of your next car's premium. Larger and more expensive cars have larger OD premiums so the same 50 percent NCB is worth much more in absolute rupees.

These are indicative first-year premium calculations assuming you carry the full 50 percent NCB from your previous car. Actual savings depend on the precise OD premium quoted by the insurer of the new car.

A common way sellers lose this money — a dealer offers a trade-in deal on the old car plus a new policy on the new car with zero NCB, saying the dealership will waive something else in return. Always do the calculation in rupees. On an XUV700, giving up your 50 percent NCB is worth 14000 rupees in year one plus further savings in years 2 and 3 if you stay claim-free. Do not give that away for a notional paint-protection coating or a free accessories voucher.

If your motor policy lapses for more than 90 days without renewal, the NCB is considered forfeited under IRDAI rules. The new policy, even if you take it out with the same insurer, starts at zero NCB.

This catches sellers in two ways. First, someone who plans to sell a car decides to let the policy expire to save on the renewal premium before the sale. The car then takes longer to sell than expected — a common story in a slow resale market — and 91 days later the NCB is gone with no Retention Letter issued in time.

Second, a seller does request the Retention Letter but the insurer takes weeks to issue it and in the meantime the 90-day clock starts ticking on the seller's ability to carry the bonus forward cleanly. The best practice is to request the Retention Letter simultaneously with the cancellation email and receive it within 3-7 days. The 3-year retention validity runs from the policy end date, not from the date the letter was issued.

Trap one — the dealer says your insurance comes with the car. It does not. The NCB within the policy is yours personally. A dealer who takes your car in trade and does not tell you about NCB retention is either uninformed or quietly absorbing the value into the trade-in price. Always raise the NCB question first.

Trap two — the dealer offers a new-car policy with zero NCB claiming your old NCB cannot be transferred because you are buying from a different brand or because the insurer is different. This is not correct. NCB transfers across insurers and across car makes — the Retention Letter is portable. Any refusal is a signal to walk to a different dealer or buy the policy yourself online after the car is delivered.

Trap three — the used-car buyer says they will pay more for the car if the insurance is also transferred. Some sellers agree, cancel their mid-policy transfer request, and leave the NCB with the vehicle in the hope of a slightly higher sale price. In practice the NCB value rarely translates into a higher sale price — the buyer is getting what is already legally theirs under Section 157. Better to hold the NCB for yourself.

Trap four — agreeing to bundle insurance into the dealer trade-in at a new-car showroom. Always request the new-car policy quotation with your accumulated NCB applied separately and in writing. A showroom quotation without NCB is not a valid quotation for a customer returning from an earlier insured car.

If your next purchase is a used car rather than a brand-new one, check our guide to verifying a used car's history so the seller's own insurance transfer and claim history are clear before you commit.

When buying the first policy on your next car, the insurer will ask for your NCB status. Tell them clearly — I have an NCB Retention Letter from [previous insurer] dated [date] for [percent] NCB. Please apply this to the Own Damage premium on this policy.

Email the PDF copy of the Retention Letter to the insurer's underwriting team. The insurer will verify the letter (often by phone call to the issuing insurer's back office), apply the NCB on the first-year premium, and print the discount on the policy schedule.

Check the policy schedule before paying. The line item should read No Claim Bonus [percent] — discount [rupees]. If the schedule shows zero NCB despite your Retention Letter, pause the payment and sort it out before binding the policy.

Some insurers process NCB retention in near-real time via their online portal — Digit and ACKO both allow upload of the Retention Letter and apply the discount during the online checkout flow. Traditional insurers may require an overnight underwriting cycle. In either case the letter is honoured.

For owners going in the opposite direction — moving from one state to another or re-registering a car across states — the insurance and NCB are not affected but the RC does need re-registration; see our vehicle re-registration guide for that process.

Owning two cars in your name. You can hold separate NCB slabs on each car. You cannot combine them. The NCB on Car A stays with Car A's policy; the NCB on Car B stays with Car B's policy. If you sell Car A, you retain its NCB separately to apply to your next car purchase — you cannot transfer it into Car B's ongoing policy to stack discounts.

Inherited vehicles. If a car is transferred to you by inheritance after the registered owner's death, the NCB on the policy does not transfer to you — the policy is closed and the bonus ends. You take out a fresh policy in your name from zero NCB. This is distinct from the RC transfer to a legal heir which does happen under the Motor Vehicles Act.

Company-owned cars being transferred to employees. The NCB belongs to the company, not the employee. When a company sells a staff car to an employee, the NCB remains with the company and can be applied to the company's next vehicle within 3 years. The employee buys a fresh policy with zero NCB.

NCB for commercial vehicles. Commercial and fleet vehicles follow a different IRDAI NCB schedule with lower slab values (starting at 20 percent and capped at 50 percent but with stricter reset rules). The same Retention Letter mechanism applies but the rupee impact is often smaller proportionally.