No-Claims Bonus Explained
The no claims discount system has been part of the car insurance policy for generations, and it represents the most significant way to save money on your car insurance.
While most people understand the basic principle of “don’t claim on your insurance and get a discount as time goes on”, the specifics and impact of the no-claims bonus can often be misunderstood.
This article seeks to go into some depth of the no-claims discount and give you a full understanding of it.
What is an NCB (No-Claims Bonus)?
No-claims bonus (or no-claims discount – same thing, different words), is an adjustment made to your car insurance premium based on the number of years that have passed since you last made a claim.
In real terms, it gives the insurer an understanding of the level of risk they are undertaking in providing you with cover.
Insurance premiums are always a calculation based on the risk of you making a claim – if you can show that you are unlikely to do so, then the cost of your premiums drops.
How does an NCB work?
For each year you drive insured and do not make a claim, you qualify for a year’s worth of no-claims bonus.
Some insurance companies offer the bonus after 10 months, rather than a full 12, but the essence remains the same.
One year of claim-free driving = one year NCB, two years of claim-free driving = two years NCB etc.
Is it worth having a no-claims bonus?
The impact of having a no-claims discount is significant. For some, the bonus generated by a no-claims discount can be as much as 65%! It depends slightly on your insurer, but a standard discount is as follows:
Years of No-Claims Bonus
Insurance Premium Discount
5 or more
With insurance premiums a significant cost towards the ownership of a vehicle, maintaining your no-claims bonus is key to keeping annual fees down. For many, a five-year no-claims discount can be worth more than £500 per year!
Looking at how to build up your NCB is easy – simply don’t make a claim on your insurance. But is it as simple as that?
How is your NCB affected after making a claim?
In the simplest terms, if a claim is made on your car insurance, then you will lose some (or all) of your no-claims discount. This can happen if:
- You are at-fault in a road traffic accident
- Your car is vandalised or stolen
- Someone damages your car and drives away
You will often have the option to preserve your no-claims bonus by paying for any repairs privately outside of your insurance – while this can be expensive, when the damage is minor it can be preferable to losing a large insurance discount.
When a claim is made on your car insurance, you do not necessarily lose all your no-claims bonus. Your insurance company will often take a few years off the discount rather than clearing it entirely. Thus, a 6-year NCB may be brought back to a 3-year discount following an accident where you were at fault.
What is “protected NCB”?
Many insurers offer the option to protect your no-claims bonus in the case of an accident – an extra level of insurance on top of your basic insurance.
Determining if this is right for you will depend on your circumstances. Our article “What Happens to my No-Claims Bonus After an Accident?” has more information regarding the value of a protected no-claims bonus policy.
What happens when you change your car?
Taking out a new insurance policy will break any chain for building a no-claims bonus in that year, however, it won’t affect any built-up discount.
For example, if you have 4-years no claims bonus and midway through the year get a new policy on a new car, you won’t get an extra year for that year and will begin the next period with that 4-years bonus already established.
If you keep your insurance with the same company but merely switch the car the policy is on, then many insurers will regard it as a continuation of the same policy and the extra year will be gained as usual. Speak to your insurer to understand their specific rules.
What happens if I change insurers?
If you choose to move insurers, then you may need to request a letter detailing your no-claims bonus from the previous insurer to show the new company. Like changing a car, you will not receive any bonus for an incomplete year and will start your term with the new insurer fresh at the start of a year.
As online systems become more prevalent, many insurers can validate your current no-claims discount without requiring physical proof and will advise you if this is the case. If in doubt, however, of if you have any other concerns regarding your previous insurance company, it is worth requesting a confirmation letter for your records.
Can I use my no-claims bonus on two cars?
If you have two cars which you insure, then usually only the main vehicle insurance receives the benefit of your no-claims discount.
Some insurance companies are willing to stretch the discount when insuring multiple cars, but it is not guaranteed to be the case. You should always assume a second vehicle doesn’t get the benefit of your NCB.
Do named drivers build a no-claims bonus?
Only the main driver on a policy will build up a no-claims bonus. If you are a secondary named driver, then while you may be receiving a current discount on your insurance through your association with an established driver, you are not building your own transferrable history of no-claims. It may be beneficial to move to your own policy to do so.
How does my NCB work with work vehicles and company cars?
It is rare that your insurance company will utilise your no-claims bonus with a work vehicle unless it is also your main transport (such as a company car).
If you have personal car insurance on a company car then you will build up a discount as normal and can transfer it to any other personal policy you get should you change jobs or otherwise lose that company car.
How long do no-claims bonuses last for? Do no-claims expire?
If you stop driving for a time, then you will lose your no-claims bonus. Most insurance companies will not consider a no-claims bonus that is more than two-years old (it is possible to find a few that accept them up to three-years). This can be particularly devastating if you move to a major city (such as London) and give up your car for a few years. You will be starting your no-claims discount as a new driver once you return to regular driving.
How can Non-Fault Claims help?
If you are involved in an accident that was not your fault, then by calling us at Non-Fault Claims, we can help you get all the compensation you are due, including any money needed for vehicle repair or replacement, without involving your insurance company – preserving your no-claims bonus in full, as well as providing a service for a temporary car replacement and personal injury compensation that your insurance company cannot offer.
Give us a call today for more information or fill in our contact form to have an adviser call you at a convenient time.