What is a no-claims bonus?
If you don’t make claims on your car insurance, your provider will give you a no-claims bonus – but what is it exactly?
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A no-claims bonus (NCB) is a handy insurance discount that motorists receive from their insurer if they don’t make any claims on their policy.
For each year that passes without making an insurance claim, your discount will increase. This will help lower the cost of renewing the policy.
The more years you go without filing a claim, the more affordable your car insurance will become in the long run.
Based on the insurance company, this is limited to a number of years – this is usually between six and nine.
How does the no-claims bonus work?
Insurance providers like to reward those who don’t claim on their car insurance because it shows they are safe drivers.
If you don’t have any issues – accidents, for example – in your first year of driving, your insurer may offer you a renewal quote for your policy.
This is usually a handy 10% discount, and should you stay accident-free the following year, your discount is likely to increase to 20%.
As mentioned, insurance companies will continue to offer improved discounts for a specific number of years.
Once you’ve reached the discount limit, you’ll still benefit from a hefty reduction – considering how pricey car insurance can be, that’s not bad!
Bear in mind that your no-claims discount will only rack up if you have a specific policy in place for an unbroken number of years.
This means that if you sell your car after a couple of years and don’t buy a new one for a certain amount of time, you’ll lose the NCB you’ve built over time.
Generally, car insurance companies won't accept a no-claims bonus that's older than two years.
This can vary depending, but most won't accept a no-claims bonus that's lapsed for more than two years.
How can a claim impact my NCB?
If you’ve had an accident on the road, you’ll have to make a claim on your car insurance.
This is likely to have an impact on your no-claims bonus, but to what extent depends on your insurance provider.
Usually, you may end up losing two or three years of your no-claims bonus, so if you had accumulated a 50% discount, at renewal you might only be able to bag 30% off.
If the other road user is at fault, however, your NCB might remain intact. This is because your insurer should be able to reclaim repair expenses from the other party’s insurance provider.
If insurers can’t agree on liability, they’re likely to split the costs of the claims, and so both drivers’ no-claims bonus could be affected.
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Should I pay more to protect my NCB?
If you’ve managed to build up an impressive no-claims bonus over several years, you may want to think about paying for no-claims protection.
If you’re involved in a collision, you may lose a chunk of your discount, and if that ends up being 50%, losing such a significant percentage would be a shame.
If you pay a little extra for protection, you won’t risk throwing away your discount should you need to make a claim.
Bear in mind, however, that while paying for no-claims protection will preserve your bonus, it won’t necessarily shield you from an increase in premium costs.
In fact, making a claim on your car insurance will enhance your level of risk to an insurer, meaning your policy expenses could go up as a result.
Can I change insurance companies and keep my NBC?
Good news – in most cases, you can! If you like to shop around every so often in search of the best insurance policy, you won’t have to go back to square one.
All you need to do is provide your new insurer with proof of your current no-claims bonus. This could be either your recent renewal letter or insurance certificate.
If your no-claims bonus is at 40%, for example, you’ll get the same discount with your new insurance provider too!
Can I use my NCB on more than one car?
In most scenarios, this isn’t possible.
The only way to use the same NCB on multiple cars is by insuring them all at the same time so that the number of no-claim years will be identical for all your cars.
But what if you have a multi-car policy? No luck there either, unfortunately.
Each vehicle on the policy will have its own bonus, meaning the NCB can’t be shared or transferred to the other insured cars.