Car insurance is notoriously expensive, but the silver lining in this particular cloud is the no claims bonus. Every year of claims-free driving see policy providers subtract a percentage of the premium you’d otherwise pay as an incentive to reward careful motorists.
For every year you have car insurance and don’t make a claim, you’ll get money off the following year’s premium – this is known as a no claims bonus (NCB) or no claims discount (NCD).
The more years you drive without claiming, the greater the no claims bonus you’ll earn. If you have to make a claim, you risk losing part, or all, of your no claims discount.
While some car insurance providers offer no claims discounts for up to eight years of claims-free driving, the maximum discount is generally achieved within nine years, often less.
The Association of British Insurers says that a driver who’s gone a year without making a claim could get a discount of around 30% off their premium, while after five years they could get around 60% off.
After building up a no claims discount for a number of years, drivers typically receive a maximum discount of around 70 or 75%, or even 80%.
What happens to your no claims discount after an accident will depend on whether or not the accident was your fault. If it was, your no claims discount will usually be reduced in line with ‘step back’ rules which can be found in your car insurance policy documents. This usually knocks down the discount by one or two years after a claim. Make more than one, though, and you risk losing all your no claims bonus.
If the accident wasn’t your fault and your insurance provider is able to recover the costs from the other driver’s insurer, this won’t have any effect on your no claims discount.
If you claim on your car insurance and your insurer can’t reclaim its losses, such as if your car was stolen and not recovered, you’ll usually lose some, or all, of your no claims discount. For example, if your car is stolen or vandalised, this will usually be treated like an at-fault claim by insurers as it’s unlikely you’ll be able to recover any costs from the culprit. Your no claims discount will be reduced or removed as a result.
The one big exception is if your car was hit by an uninsured driver. In this case you’ll not lose out if your policy includes an “uninsured driver promise” clause.
If you are involved in an accident where no one was to blame, both insurance providers may split the cost of the claims and both yours and the other driver’s no claims bonus would be reduced or removed.
Certain types of claims won’t affect your no claims discount. For example, if you have comprehensive cover and get a chip in your windscreen that needs to be repaired or replaced, you won’t lose any of your NCD. You will still have to pay an excess, however.
Typically, a no claims bonus is valid for two years. This means If you haven’t had car insurance for two or more years, perhaps because you sold your vehicle, your no claims discount will expire. The outcome is you’ll need to build up a new discount from scratch when you next take out a policy.
You’ll usually need to provide proof of the how much no claims discount you’ve acquired when transferring your cover to a new provider. This may be found on your policy schedule, but usually you’ll need to get evidence of your current discount status from your current insurer
It’s worth asking your new insurer exactly what proof they need when you buy the policy just in case they have any special requirement, such as the proof being transferred directly from your current insurer.
A way to safeguard your no claims bonus is to pay an additional amount on top of your car insurance to protect it. This means that even if you were to make a claim, your discount would stay intact.
Making two claims in a year with a protected no claims bonus won't have an effect with some insurers, though others may significantly reduce it.
It’s worth remembering that a protected no claims bonus won’t entirely shield you from a higher premium when you come to renew your car insurance. When calculating premiums, insurers look at the number of years without claims, as well as the number of claims made. To put it another way, it’s a no claims bonus, not a no blame discount.
A no claims bonus applies to a single policy, so you won’t be able to use it on any other vehicles you own that are covered by their own insurance policy. However, you can build up a second no claims bonus on a separate car insurance policy for a second car.
You can also build up a no claims bonus on a multicar car insurance policy. You could still lose your discount if you make a claim, but you won’t if another driver lodges a claim for their car as each driver’s discount is applied specifically to their car.
Named drivers are not generally able to build up a no claims discount. However, some insurance providers will allow it, so long as the named driver later takes out a car insurance policy with the same insurer.