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How does a no claims bonus work?

How does a no claims bonus work?

Category: Insurance

Updated: 17/01/2017
First Published: 01/08/2013

A no claims bonus (NCB) is a great way to save money on your car insurance quote.

The Association of British Insurers says that just one year's worth of no claims could equate to 30% off your premium.

Earn four or five years of continuous no claims bonuses, and your discount could be in the region of 60% - so you could be quoted 60% less than if you hadn't built up any no claims!

What is a no claims bonus (or no claims discount)?

When you have a car insurance policy, you will start to accrue a no claims bonus/discount for every year that you don't make a claim. Importantly, it's not about whether the claim was your fault or not – it's simply whether you had to claim on your insurance.

So if your car was burnt out or you were hit by an uninsured driver and you had to make a claim, you may not be able to earn a no claims bonus for that year.

You can earn no claims on all types of car insurance policies (third party, third party fire and theft, and fully comprehensive).

No claims bonuses lower your car insurance premiums. Normally you can only earn no claims discounts for up to five consecutive years (although some insurers will let you earn it for up to nine years!).

Subsequent years of no claims won't bring your premium down any further, although not claiming will safeguard the level of discount you have.

How much does my no claims bonus save me?

Your annual renewal premium will be reduced by a set percentage depending upon the number of no claim bonus years you have accrued. The discounts vary between insurers, but the average no claims bonus scale starts at:

Years Average % Reduction
1 30%
2 40%
3 50%
4 60%
5 + 65%

Can you lose your no claims bonus even if it's not your fault?

Unfortunately, yes. If you're hit by an uninsured driver, for example, or even if your car is stolen, you could potentially lose your no claims bonus if you need to make a claim.

However, the car insurer may be able to recover all costs from another insurer where a claim is not your fault. In this case, you wouldn't lose your no claims discount. There's another caveat, too…

Can I protect my no claims bonus?

Some insurers offer you the option to protect your no claims bonus. This isn't an unlimited shield, but it at least means that you wouldn't lose your bonus in the event of fire or theft, or if an uninsured driver crashes into your car.

Having a protected no claims bonus will add to your quote – although not by as much as if you lost your no claims discount altogether! It's worth noting that having a protected NCB doesn't necessarily stop your premium from rising in subsequent years.

Can named drivers earn a no claims bonus/discount?

A few car insurers will allow named drivers to earn a no claims discount. This is brilliant if eventually the named driver wants to go onto their own car insurance policy later, because usually, a standard car insurance policy doesn't allow named drivers to earn their own no claims history. Do a bit of research if this is the type of feature you're looking for.

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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

 

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