The No Claims Bonus Guide
For each year you hold a car insurance policy without making a claim you are entitled to a year’s no-claims bonus, subject to a maximum (usually up to 5 years). This reward reduces the cost of your car insurance premium for the following year and range from 30% for one claim free year up to 60% or more after four or five years. It’s often referred to as a no-claims discount (NCD).
In the insurance industry, ‘no claims’ means that the insurer has not had to pay for a claim. If you stop driving for a while, you can usually keep your bonus up to two years.
There is no standard scale of NCDs, but the list below indicates the typical discounts provided in private car insurance.
Period of Insurance NCD
1 year (i.e. the preceding year) 30%
2 consecutive years 40%
3 consecutive years 50%
4 or more consecutive years 60%
Most insurers operate a “step-back” facility under which, if a policyholder makes just one claim during the period, any NCD which has been earned will be reduced e.g. from 60% to 40%, from 50% to 30%, or from 40% to nil.
A policyholder with maximum NCD can retain their discount if they have made no more than for example, two claims in three periods of insurance.
The NCD is usually unaffected if the insurer can make a full recovery of its outlay. Claims for windscreen damage do not normally affect NCD entitlement.
Policyholders can “secure” their no claims bonus in return for a slightly higher premium.
As part of many fully comprehensive insurance policies, many Insurance companies will offer “protected no claims bonus” terms in their policies. This will likely cost more. In most cases this is probably a worthwhile additional sum to pay - after all, a 40% no claims bonus on a motor insurance policy costing £1,000 before discount, is worth an £400 per annum saving. So a relatively small additional premium of £50 for example to protect the NCD seems like a good investment).
No Claims Discounts were originally enjoyed by policyholders renewing their insurance with their existing insurer, however nowadays it is standard practice for car insurers to allow for NCD entitlement earned with another insurer. No claims discounts can now also be transferred between insurance companies and after five years of claim-free motoring you could be in line for a massive 75% discount on the premium. Proof of entitlement is required, usually in the form of the renewal notice issued by the last insurer.
Some additional issues worthy of consideration when looking at NCD include:
- If you weren’t responsible for an accident or the cost cannot be recovered, will your no-claims discount be affected?
- Is it possible to transfer a no-claims discount built up while driving on somebody else’s insurance? Do you need to have been a named driver?
- Is it possible to transfer your no-claims bonus on to a second car?
- How many claims are you allowed before your no-claims bonus is affected?
It pays to shop around. Take plenty of advice and do your research. Consult authoritative or and respected and affordable car insurance providers such as Co-operative Insurance, while ASDA Finance’s car insurance also comes as recommended.
