No Claims Bonus / Discount Guide and Rules Explained
When it comes to the running costs of a car, particularly insurance, there’s nothing better than having driving experience and age on your side. Car insurance, especially for new and young drivers is often the most expensive running cost of a car.
Car insurance providers clearly prefer motorists that do not claim against their car insurance policy as it saves them money. To encourage drivers not to claim, they offer a no claims bonus, or otherwise known as a no claims discount.
What is a no claims bonus
A no claims bonus is simply a reward in the form of a discount off a car insurance policy. As the name suggests, it benefits drivers who do not make a claim against their car insurance.
How does no claims bonus work
For every year that you hold a current and active car insurance policy, you will receive a percentage discount off of your insurance premium, providing you do not make a claim.
How is a no claims bonus worked out
The amount of discount obtained each year for a no claims bonus varies depending on the insurer. It is however typically worked out on a similar basis. Here is an example of how no claims bonus is worked out and how much you can save by not making a claim:
|Number of years no claim bonus held||Discount Earned|
|1 year claim free driving||30%|
|2 year claim free driving||40%|
|3 year claim free driving||50%|
|4 year claim free driving||60%|
|5 year claim free driving||65%|
|6 year claim free driving||65 to 75%|
|7 year claim free driving||65 to 75%|
|8 year claim free driving||65 to 75%|
|9 year claim free driving||65 to 75%|
As the table shows, just one years’ worth of no claims bonus can save a considerable amount. No claims bonus is particularly beneficial to young and new drivers who face the highest insurance premiums. A young driver can easily expect to pay anywhere from £1,000 to £1,500 or more for their firsts years car insurance. With just one years no claims bonus, the following years premium could be reduced by anywhere between £300 to £450, clearly a huge discount.
How much no claims bonus can I get
This is again dependent on the insurer, but many providers offer a maximum no claims bonus of 75% discount off the total cost of annual car insurance.
How many years no claims bonus can I get
This also varies depending on the insurer. Some insurers offer a maximum of five years no claims bonus, whilst others exceed this up to nine years. The more years no claims bonus you accumulate doesn’t necessarily provide a larger percentage discount. It’s therefore best to check with a provider the maximum no claims percentage they offer and how many years it takes to accumulate this.
How much no claims bonus do I have
You can contact your car insurance provider who will provide details for the amount of no claims bonus percentage you have, alternatively, insurance renewal documentation display the level of no claims you are entitled to for the following year.
Will I lose no claims bonus if it is not my fault
Other than minor claims, any claim you make on your insurance policy may result in you losing some or all of your no claims bonus, unless it is protected. This may appear unfair especially if the incident is not your fault, but it’s a no claims bonus you receive and not a no fault bonus. It may be worth considering protecting your no claims bonus. You may however not lose all of your no claims bonus. How much you lose depends on the insurance providers terms and how many claims free discount years you have to your name.
So as an example, if you have four years no claims bonus and make one claim within a year, you may lose two years of your no claims bonus, leaving you with two years on renewal. As a general rule, two years are taken off of your no claims discount per claim. Some insurance providers also permit you to make one or two claims per policy year that do not affect your NCD. This may however be subject to the amount being claimed.
Can I protect my no claims discount
Almost all car insurance providers offer a service that allows their policy holders to protect their no claims discount. Typically you will have had to of built up four or five years’ worth of no claims discount before you become eligible for the NCD protection service.
How do I keep my no claims discount / bonus
To keep your no claims bonus you have two options. You will have needed to take out no claims bonus protection prior to the incident, or if it is you considering claiming on your insurance and not a third party, simply do not claim.
You will need to work out whether it is cost effective to either claim or pay the costs yourself. As an example, say you have a minor accident and scratch the paint work on your car. The damage is superficial with no dents. You obtain a quote to get it repaired that comes in at £350. If you have a car insurance excess of £250, the insurance company will therefor only pay out £100 of your claim.
That’s still £100 so could well be worth making the claim. If however for example you have built up a four years no claims bonus, you may face losing two of those years on your next renewal, losing you 30% discount off your insurance premium. How much 30% will cost you is of course relative to how much your insurance is.
Plus it still doesn’t end there. Insurance providers will generally increase your premium on renewal in the event of a claim. They are a business after all and want to claw back any loss if at all possible.
So you need to take all immediate costs into account, but more importantly potential future costs that may be incurred due to a claim. Even if your no claims bonus is protected, be highly cautious of the impact that making a claim will have on future insurance premiums.
How much does no claims protection cost
Once again, it is variable depending on the insurer. Generally the cost of no claims protection is within 5 and 15% of the total cost of the insurance premium. How much it costs to protect no claims can vary depending on the insurer and the cost of your premium.
Is it worth protecting no claims bonus
Building up a five or more year no claims discount is one of the most valuable assets in keeping car insurance costs as cheap as possible. As it’s taken so long to obtain your NCD, it must make sense to protect it?
You could almost think of no claims protection as insurance for your insurance, which as bizarre as it sounds, has its advantages and disadvantages. Regardless of whether an incident is your fault or not, if you claim on your insurance, especially if you make many claims, your insurance cost will significantly increase whether your no claims is protected or not.
It’s also worth noting that many insurance providers will only permit a certain amount of claims to be made per policy year, even on a protected no claims discount. If claims are exceeded, policyholders may see their protected no claims reduced or even lost.
Essentially, self-assess the risk that you may make a claim. If you cover high mileage each year for example, you are higher risk. It’s not just your own driving ability that should concern you, if you are hit by a non-insured driver and you need to claim, this will affect your no claims.
On the other hand, a low mileage car owner who stores their vehicle in a locked garage will be low risk. A claim due to vehicle vandalism for example will affect no claims. Keeping a vehicle garaged will of course make this low risk.
If you consider yourself low risk, paying out extra for no claims protection over a number of years without making a claim may ultimately cost you more. Base the decision on whether it is worth protecting your no claims bonus on your current situation, plus previous driving history.
Questions to ask about no claims bonus whilst obtaining quotes
No claims bonus is important, it can save you a fortune, so asking the correct questions is also important. Whilst changing insurance companies, some of the following questions may help you decide if that is the best company to go with:
- What is the maximum percentage no claims discount you offer and how many years does it take to obtain this?
- Do you offer no claims protection and how much does it cost?
- Do you offer no claims discount on a named driver?
- Do you offer no claims discount to provisional licence holders?
What affects no claims bonus
In basic terms, unless a no claims bonus is protected, the policy holder may lose some or all of their no claims if
- an accident is the policy holders fault (first party) and they claim on their policy, or
- if the policyholder makes a claim even if it isn’t their fault but the insurance provider is unable to claim back expenses from any third party.
An example could be that:
- your vehicle was hit by an uninsured driver
- received damage by an unknown source
- was vandalised whilst parked on a street
No claims bonus as a named driver
If you are intending on adding a named driver (or second driver) to your insurance policy, it could be worth asking if the named driver is able to build their own no claims. Some insurance providers reserve this for the policy holders, whilst other extend this also to a named driver.
As building a no claims bonus is one of the most effective means of cutting the costs of car insurance, named driver no claims bonus is especially important for a young named driver who intends on taking out their own car insurance at a later date.
No claims bonus on a provisional licence
It is possible to earn a no claims bonus whilst driving on a provisional licence. This varies across providers, but no claims is especially important for young a new drivers. If you intend on purchasing your own vehicle, to earn no claims, you may need to insure the vehicle under your own name if on provisional licence to obtain a no claims discount. Although the initial costs may prove a little expensive, earning a 30% no claims discount within one year of driving could ultimately save you more.
Can you get no claims bonus on two cars
Typically you can only use your no claims bonus on one car. It may be possible however if the two cars are insured on the same policy, though this is subject to the insurance providers terms.
Can you get any no claims bonus on third party fire & theft?
You can earn a no claims bonus on any type of car insurance, whether it be:
Does a no claims bonus expire or run out
Yes it does, but the period in which it becomes invalid or expires varies considerably depending on the insurance provider or policy type. An insurance provider may for example allow a no claims bonus to still be valid even if there has been a break on insurance cover for up to three years. Other providers this limit may be two years or 12 months only. Some insurance providers may not accept a no claims discount if there has been any break with active car insurance at all.
Proving your no claims bonus
If you are changing car insurance companies which is often the case due to a better quote, you will of course want to take along all your no claims bonus that you have acquired. The new insurance provider will require proof of your no claims, and yes they may actually check up on this.
From your old insurance provider, you will have received a letter of invitation to renew your insurance. This may also be in e-mail form, but it’s this letter that will detail the amount of no claims bonus you are entitled to for the following annual renewal. You will need to e-mail or send your new provider this letter.
OTHER TYPES OF CAR INSURANCE AND INFORMATION
- How Does Car Insurance Work
- Car Insurance Excess
- Third Party Car Insurance
- Third Party Fire and Theft
- Comprehensive Car Insurance
- Black Box Car Insurance
- Short Term Temporary Car Insurance
- Drive any Car Insurance
- What is GAP insurance and do I need it?
- Green Card Insurance
- No MOT, Invalid Insurance?