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If you're confused about the terms NCD, excess and named driver, fret not. Here's a breakdown on what each term means and how they work.

28 Jun 2010 | Category: Car Ownership Advice

In most cases, car owners sign up for a car insurance plan so that they can avoid burning a hole in their pockets in case something goes wrong. All they have to do is make a claim. However, there are benefits available for the car owners if they do not make any claims over a certain period of time. This is called the NCD.

What is NCD?

NCD stands for No-Claim Discount. This is a discount offered by car insurers for car owners who have not made any claims within a year or more. The longer you go without making any claims, the higher the discount you'll get.

The NCD is designed to lower the insurance premium that car owners will have to pay for the following year. This way, insurers will be able to reward car owners who have been pretty careful on the roads. The table below illustrates how car insurers determine NCD.

Private Car Plans Commercial Motorcycle and Vehicle Plans
Insurance Period without Claim Renewal Discount Insurance Period without Claim Renewal Discount
1 year 10 percent 1 year 10 percent
2 years 20 percent 2 years 15 percent
3 years 30 percent 3 years or more 20 percent
4 years 40 percent

5 years or more 50 percent

Will I lose my NCD if I make a claim?

Not always. Insurers refer to the Barometer of Liability Agreement (BOLA) to assess the liability of each party involved in an accident. You will not lose your NCD if your liability is less than 20 percent for an accident involving an identified vehicle.

If you are liable, however, or if you are found to be 'at fault', your NCD may be affected. The exact amount varies between insurers. Some may impose a 30 percent reduction while others may only go for 10 percent.

Check out the table below for a rough gauge on NCD reduction. Again, it's best to check with your insurer on the exact reduction amount.

Current NCD Reduced NCD
1 Claim Made 2 or More Claims Made
50 percent 20 percent 0 percent
40 percent 10 percent 0 percent
30-10 percent 0 percent 0 percent

Does my NCD apply to me or my car?

Your NCD applies to you, not your vehicle. When you sell off your car and decide to buy a new one, you will retain your NCD. One thing to note, though, is if you own more than one car, your NCDs for each car will vary. For example, if you have a 50 percent NCD on your first car, your second car will not be entitled to the same 50 percent NCD.

You are, however, allowed to transfer your NCD from one car to another but only one NCD can be applied to one car at any one time. One caveat to this is that your NCD is non-transferrable to other drivers, with the exception of your immediate family members. This, of course, is subject to approval by your insurance company.

Your NCD is non-transferrable to other drivers outside of your immediate family, so be careful who you lend your car to

Can my NCD be protected?

Considering the high value of an NCD, it's always a good idea, though not mandatory, to protect it. insurance companies will typically offer you an NCD protection scheme once yours reaches 50 percent.

For an extra fee, you will be able to make a claim within a one-year period without having it affect your NCD. The table below shows a general guide on how each claim you make within the year affects your NCD. Again, it's best to check with your insurer on the exact amount, and if you are eligible for an NCD protection coverage scheme.

Claims within the Insurance Period Renewal NCD
1 50 percent
2 20 percent
3 or Above None

What is the role of excess?

Excess, also called deductible, is the first amount of the claim, which the insured driver has to bear.
If the insured driver has an excess of $500 and the total repair costs $3,000, then the insured has to pay $500 while the insurer pays the remaining $2,500.

Insurers usually impose some excess as this serves as a form of deductible. With an excess, the insured will tend to be more careful because if a claim is made, the insured will have to pay out of their own pocket and contribute to the claim.

Motor insurance policies are usually divided into several sections. Section 1 normally covers 'own damage' claims. When you buy a comprehensive motor insurance policy, you are covered for 'own damage'. For example, if your own vehicle is damaged, you are allowed to claim for its repairs, whether or not you are at fault.

So, assuming your excess is $500, Section 1 will only cover your 'own damage' claim. For example, if you hit another vehicle and your damages cost $6,000 while the other party's (third party) damages cost $8,000, your $500 excess will only apply to your vehicle's $6,000. Your insurer will pay the full amount for the third party's $8,000.

You are still required to pay an excess if you submit an 'own damage' claim

In some cases, you will find terms such as Excess: $500 (Section 1 & Section 2 separately), where Section 2 in the policy deals with third party claims. This means that if there is an excess in Section 2, it will apply to any third party claim.

Using the same example, you (the insured party) will have to pay $500 excess while your insurer pays the remaining $5,500 for your 'own damage' claim of $6,000. On top of that, you will have to fork out another $500 excess while your insurer covers the remaining $7,500 for your third party claim of $8,000.

Additionally, there is another section called All Claims. It simply means the total excess applicable for every accident. Using the same example above, you will only need to pay the $500 excess while your insurer covers the remaining $13,500, which is the sum of the $6,000 'own damage' claim and the $8,000 third party claim, minus the $500 excess.

What is named driver and is it important?

A named driver is someone who can drive the car with the owner's permission and is covered by the owner's insurance policy. A named driver gets the same privileges as the car's owner. It is common for car owners to include other names in their car insurance plan, especially for their family members.

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Nonetheless, in a scenario whereby an unnamed driver gets into an accident, the car insurance company is entitled to impose a higher excess on the claim.

For example, if the insurance excess of your policy is $500, and you allow an unnamed driver to drive your car, who subsequently gets into an accident, the insurance company may demand you to pay more than the current $500 excess on the claim. On the other hand, if the driver is a named driver on your policy, and he or she gets into an accident, the excess stays at $500.

However, the one drawback that multiple named drivers on a policy have is the extra cost. This is due to the fact that the more named drivers you have, the higher the chance of an accident occurring. This is especially true if you include many inexperienced drivers' names into your policy, as they are deemed as higher risk drivers by insurers.

Will I lose my NCD if I sell or scrap my car?

Fortunately, most Singaporean car insurers will allow car owners to retain their NCD for as long as 24 months. However, there are also some insurers that will only wait up to a maximum of 12 months. Therefore, it is best to confirm this with your insurer.

*This article was updated on 27th February 2018. 
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