No Claims Bonus for Car Insurance Explained

7th February 2018

By Adam Smith

Shopping for car insurance can be tricky when you don’t know how to get the best deal. These days, online car insurance comparison can make the process much simpler and finding top offers is as easy as filling out a few details on your laptop. But did you know that you can still negotiate a better price for your car insurance? Your no claims bonus (NCB) is one of the ways you can do this.

Having no claims, whether for one year or 10, can help to drive your premium down. Here we share everything you need to know about no claims, including how it works, how to get the best no claims bonus car insurance and what to do when you want to switch insurance companies.

What is a no claims bonus?

A no claims bonus (or no claims discount) is something that a car insurance policyholder is able to accumulate over time. Normally, a no claims bonus is measured in years but some insurers are now offering accelerated policies, bringing that time period down from 12 to 10 months.

The more consecutive years you can go without making a claim, the better your discount will be. This system has been put in place to reward good drivers and although accidents can’t always be avoided, it provides an incentive for people to be more careful whilst on the road. It can also deter people from making too many small claims each year (which can drive up the cost of insurance for everyone else).

According to data compiled by the Association of British Drivers, even one year’s no claims can be valuable, with discounts of up to 30% with many insurers. This percentage can go up every year, with even better reductions for experienced no claims drivers.

Simply put, cheap car insurance and no claims bonus go hand in hand, so if you want the former, you need to preserve the latter.

How much money can I save?

Every year when you renew your policy, your insurer will review your no claims and make the appropriate deductions. This will be a set percentage based on the company’s own discount regulations and can vary between different insurance agencies.

A typical quota of how much you might be able to save looks like this:

- 1 year no claims = up to 30% discount

- 2 year no claims = up to 40% discount

- 3 year no claims = up to 50% discount

- 4 year no claims = up to 60% discount

- 5+ years no claims = up to 65% discount

 

The amount you can save is technically proportionate to the number of years you haven’t claimed, but it’s important to bear in mind that in practice, it isn’t always that simple. Some insurers have different approaches to the discount system and some may even cap your no claims discount to five years. Car insurance and no claims can be extremely complicated, so shop around and compare different providers to see which policy is the best for you.

It’s also not usually permissible to use your no claims for more than one car, even if you have insured multiple vehicles with the same company.

What about named drivers?

The no claims discount is normally reserved for the policyholder only. This means that named drivers will not be able to accumulate the NCB for his/her own use when buying a policy.

There are some insurance firms that now allow named drivers to build their no claims along with the main driver of the vehicle. This is particularly appealing to parents who have their son or daughter on their insurance as it gives young drivers a chance to build up no claims for when they want to buy their own car in the future. It’s also quite beneficial to spouses who share a vehicle.

However, these named driver no claims policies often have a catch. Some things to look out for include:

- Any accidents with named drivers will affect your no claims status as a whole.

- The NCB may not be transferable to other providers so you would have to stay with the same company to benefit from the scheme.

- There may be age restrictions for younger drivers or there could be a cap how many years of no claims the named driver can accumulate.

How I protect my no claims?

There is something called no claims protection, which is an optional extra that can help to safeguard your accumulation of no claims. This type of policy will bump up the cost of insurance but it ensures that your NCB remains intact even if you make a claim in the future.

Different companies have their own rules regarding what level of protection can be offered, but a typical protected no claims policy should include immunity even for accidents where you are at fault.

No claims protection can be useful for drivers whose insurance plans can offer great incentives. It’s also handy for people who want to preserve 5+ years of no claims driving.

Remember, this will be an added expense if you don’t need it. For drivers who continue to stay claim-free for years to come, they will end up losing unnecessary money.

What happens to my NCB when I claim?

Making a claim because of an accident, damage or theft will affect your no claims. There are exceptions but a simple way of looking at it is: any situation where your insurer loses money, you will lose out too.

The way it works is by deduction. Again, all insurance firms will have their own systems, but the general rule for every claim made is around two years’ NCB deducted from your account. There is currently no industry standard, so it’s worth checking the small print before renewing or buying a policy.

 

Not at fault road accidents

If you are hit by another car and you can prove that the other motorist is at fault, your NCB may not be affected. If your provider can recover full costs from the other driver’s insurance company, this could leave you in the clear.

Cases where neither party can agree on blame, insurers may split the damage and both drivers will lose their NCB in the process.

Theft and NCB

If you claim for an incident of car theft, you will lose some/all of your no claims because your insurance company will be required to pay up. If your insurer is remunerated by another company or someone else who might be at fault, your NCB could be safe.

What happens when I switch insurer?

When you switch provider, you will need to give proof of no claims. This usually comes in the form of a cancellation letter from your existing provider. If the letter doesn’t detail your NCB, you should be able to use a copy of your current contract to prove your years of no claims driving.

Most insurers will only allow for a no claims bonus accumulated in the UK. This is due to the driving laws varying between countries and the hefty administration costs associated with it. However, if you have been driving overseas for a number of years, it’s worth asking just in case.

It’s also important to note that you will still need to declare any accidents you’ve had in the last few years – even if you have no claims protection.

Finding no claims bonus car insurance

Before shopping for car insurance, make sure you can get proof of your no claims from your previous/existing company. You also need to ensure that your no claims is still valid when you switch. If you are simply changing insurers, this will be fine, but if you have been off the road for a while, get in touch with your old insurer to see if your NCB is still effective.

After you have gathered your no claims details, use a car insurance search tool to find a provider and policy that works for you. Online comparison websites are fantastic for comparing cheap car insurance with no claims bonus. Allowing you to shop around to get free quotes from different companies at the click of a button.

The process is free and easy – and it’s the best way to save money on your insurance!

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