What is a No Claims Bonus?
When you’re looking into your car insurance policy, you’ll want to consider many factors (including the cost, level of cover, and any optional extras).
The cost of car cover is notoriously expensive, particularly for new drivers, but there are some simple ways that motorists can reduce their premiums. One of these is a no claims discount (NCD), or bonus (NCB).
A no claims bonus is awarded to motorists who have a successful track record of driving, not necessarily always without accident, but without insurance claims.
This works out to be more cost efficient for insurers, who ultimately have to pay out less in repairs, and also results in cheaper car insurance for motorists.
How does a no claims bonus work?
Car insurance companies will give their customers a set number of years in which they should not make a claim, thereby rewarding them for driving safely.
This is generally five years, though it is ultimately down to the insurer. When motorists have reached this point, insurers will reward them by reducing their annual premiums or fees.
If you continue to drive safely and you avoid making any claims on your policy, you should then see a slight decrease in the cost of your car insurance each year that you are claim-free, thanks to your NCB. A no-claims discount can save policyholders up to 30% off the cost of their car insurance, which is an offer simply too good to ignore.
You’ll earn one year’s no claims bonus for every year you don’t make a claim, starting from the date you took out your policy. This essentially means that, as a rule of thumb, you should get cheaper car insurance as you become a more experienced driver.
The best car insurance companies may offer an additional bonus such as an accelerated policy. For example, some may offer a one-year bonus after a motorist has earned 10 months.
In theory, you can earn an unlimited number of years for your no claims discount (NCD). However, you will probably find that many providers will limit the discount after five years.
Accidents can happen, and they’re not always your fault. Unfortunately, some motorists may have to make a claim based on damage to their vehicle even if they did not cause the accident. For this reason, some people like to protect their no claims discount with a ‘no claims bonus protection’ add-on.
The most effective way of doing this is to approach your insurer directly. Many may offer to protect your no-claims bonus – all you have to do is pay an additional fee on top of your policy.
This means that if you do have an accident, regardless of whether or not it was your fault, your discount will be protected.
According to recent research, adding protection to a five-year NCB will cost an average of £23 on top of your annual premiums. The cost can, of course, differ quite considerably from one person to the next. Whether or not it’s worth adding a NCB protection clause to your car insurance depends on your personal situation, but you should always talk to your insurer about the prospect of doing so to see whether they will be able to offer you a good deal.
You can read more about no claims bonus protection in our full guide to car insurance extras that are worth having.
Generally speaking, a no claims discount lasts for around two years. This includes if you don’t have your own policy.
You will have to start your no claims bonus again if you cannot prove you’ve had access to a car within this period.
How long does a no claims bonus last if you’re not driving?
In addition to your claim not lasting beyond two years if you don’t have your own policy, it also applies if you’re off the road. This could count if your car is declared as SORN, for example, or if you simply do not have access to a car.
Does a no claims bonus expire?
When you go to renew your car insurance, you may want to ask your insurer to provide proof of your no claims bonus.
If you decide to switch insurers, then your existing bonus will only be transferable for two years, after which it will expire.
The outcome of your no claims bonus after making a claim will depend on your insurer. Some insurers may simply reduce the discount if they have had to pay out, while others may get rid of it altogether, leaving you with a more expensive annual premium.
Sometimes it depends on the circumstances of the claim itself. For example, if two cars are involved and the insurers cannot come to an agreement on whose fault it is, both drivers’ bonuses may be evenly reduced.
If you pay more for a no-claim bonus protection add-on, your NCB should remain as it was prior to the incident.
Named drivers are not typically offered a no claims bonus in the UK, with most providers only offering discounts to those who are the main driver of the vehicle.
Although it’s not common, some insurance companies will give a named driver some sort of discount, on the condition that they take out their own policy as a main driver later down the line.
For example, Admiral offer a named driver no claims bonus that can be built up and later used on (or transferred to) another Admiral policy when they take out their own insurance as a main driver. Sainsbury’s bank also offers a similar scheme.
Transferring a no claims bonus to a new car
So, what happens when you change your car? You can thankfully transfer your no claims bonus from one car onto another. However, your bonus may be affected if you change your policy by switching insurer. Also, depending on your insurer, you may not earn a year’s bonus if you switch cars midway through the year.
It’s not so much changing cars that can cause an issue, but switching insurance providers.
Can I use my no claims bonus on two cars?
Unfortunately, your no claims bonus applies to one car only. However, if you do want to transfer it from one car to another, this is fine – just ask your insurer for proof of your discount.
Is it worth having a no claims bonus?
A no claims bonus is a great incentive to encourage safer driving and will certainly save you money. In some cases, you can save up to 30% on your premiums, but if you want to pay to protect them, it costs £23 on average.
For other car insurance related tips, including how to reduce your car running costs and a review of the best insurance companies in the UK, take a look at our related articles and check out our Facebook page for the latest news.
If you’re looking to build a no-claims bonus to reduce your premiums, you might also like our 17 tips to get cheaper car insurance.