What is a no claims discount on car insurance?
Key takeaways
You usually earn an additional year of a no-claims discount after completing a full policy year without a claim that affects your no-claims discount
A protected no-claims discount safeguards the discount you’ve built up, not the overall cost of your insurance, so your premium can still increase after a claim
You can usually transfer your no-claims discount when you change insurer, but providers may limit how many years they recognise
What is a no-claims discount?
A no-claims discount is a price reduction an insurer can apply to your car insurance premiums based on your claims history. You normally build up a no-claims discount over consecutive policy years without making claims - however, insurers set their own discount scales and can limit the number of NCD years they recognise.
The Association of British Insurers (ABI) says discounts can be as much as 30% after one claim-free year and 60% after five, but these are not guaranteed rates for every insurer.
How do I earn a no-claims discount?
You normally earn another year of no-claims discount after completing a full policy year without making a claim. Your NCD is usually counted in complete years - so if you cancel a 12-month policy after 11 months, for example, you would not normally earn another year of no-claims discount for that period.
Insurers can also cap how many years they use when calculating your discount. You could build up 10 years of claim-free driving only to find that an insurer only uses five or nine years when setting its discount.
How much can a no-claims discount save me?
There is no standard no-claims discount percentage because every insurer sets its own rules - having more years without claims can help reduce your price, but it doesn't guarantee that your overall premium will fall or stay the same every year.
Your insurer calculates your price using several factors, including your claims history and other details about you and your car, before applying any no-claims discount. This means your underlying insurance price could rise by more than your no-claims discount increases, leaving you with a higher renewal price even after another claim-free year.
What happens to my no-claims discount if I make a claim?
A claim can reduce your no-claims discount, but the outcome depends on the type of claim, whether your insurer recovers its costs and whether your no-claims discount is protected. For insurance purposes, a fault claim does not always mean you caused the accident - it can also mean your insurer paid a claim but could not recover its costs from somebody else.
What happened | Possible effect on no-claims discount | Can your premiums still go up? |
|---|---|---|
At-fault or unrecovered claim | Your no-claims discount may be reduced unless it's protected | Yes |
Non-fault claim where your insurer recovers its costs | Your existing no-claims discount should normally be unaffected once liability for the claim is resolved | Yes |
Claim is still being investigated | Your no-claims discount may be temporarily affected while responsibility or cost recovery is still being sorted | Yes |
You report an incident but no claim or payout is made | Your no-claims discount shouldn't normally be reduced | Yes |
What if the accident wasn't my fault?
Your existing no-claims discount won't usually be affected once your insurer establishes that you were not at fault and recovers its costs - however, your no-claims discount may temporarily be affected while a claim is still being investigated. If your insurer has recovered its costs by the time your policy is due for renewal, the Financial Ombudsman says your existing no-claims discount should not be reduced because of that claim.
However, having a non-fault claim doesn't guarantee that your future premium will stay the same.
What does a protected no-claims discount actually protect?
A protected no-claims discount normally means the discount you've earned is protected, not the overall price of your insurance. This means a claim can change the underlying price an insurer calculates for you even where your NCD stays at exactly the same level.
Before a claim | After a claim with protected no-claims discount | |
|---|---|---|
Price before no-claims discount | £1,000 | £1,300 |
Protected no-claims discount | 50% | 50% |
Price after no-claims discount | £500 | £650 |
This is an illustrative example only - your 50% discount has stayed protected, but it is now being applied to a higher underlying price, so the final premium has increased.
How much can I save with a no-claims discount?
Insurers set their own rules when it comes to the minimum and maximum discounts given but they usually range from between 5% and 60%.
According to car insurance quote data from MoneySuperMarket, drivers with a one year discount paid on average £919.51
Years of no-claims discount | Comprehensive car insurance average cost |
|---|---|
0 | £1127.32 |
1 | £919.51 |
2 | £767.23 |
3 | £690.13 |
4 | £648.34 |
5 | £586.25 |
10 | £420.23 |
15 | £395.37 |
20 | £363.76 |
Top tip: To find out how much you could potentially save you can contact an insurer and check what limits it sets or calculate your no-claims discount with our free tool.
How many claims can I make with a protected no-claims discount?
It depends on your insurer - no-claims discount protection normally allows a specified number of claims within a set period before your discount is reduced - so be sure to check:
How many claims you can make
How long the claims are counted for
What happens if you exceed the limit
Whether particular types of claim are treated differently
How much the protection costs
Protection rules vary between insurers, so check your policy wording rather than assuming your no-claims discount can never be reduced.
Can I transfer my no-claims discount to another insurer?
Usually yes, but your new insurer may not recognise all the years you've built up - for example, you might have nine years' no-claims discount while a new provider only uses five years when calculating its maximum discount. Your previous claims history has not disappeared, but the new insurer applies its own NCD scale.
MoneySuperMarket's no-claims discount tool can help you check how many no-claims discount years different insurers recognise.
How do I prove my no-claims discount?
Your renewal or policy documents might show your no-claims discount, or you can ask your previous insurer for proof. Your new provider will tell you what evidence it accepts and when it needs to receive it - don't assume every insurer has the same proof requirements.
How long does my no-claims discount last if I'm not insured?
It depends on the insurer - most insurers will usually accept a no-claims discount that is less than two years old, while some may accept one that has not been used for up to three years. Check your new insurer's rules if you've had a break from having your own policy.
No-claims discount FAQs
Is a no-claims bonus the same as a no-claims discount?
Yes, no-claims bonus (NCB) and no-claims discount (NCD) are commonly used to describe the same thing: a discount based on the claims history you've built up on your insurance policy.
Can I use the same no-claims discount on two cars?
Usually not - you normally have one no-claims discount entitlement that can only be used on one vehicle at a time. If you insure a second car separately, it will usually need to build its own no-claims discount.
Multi-car insurers may have their own policies or requirements for building individual no-claims discounts on each vehicle.
Can I build a no-claims discount as a named driver?
Usually not - the main driver generally builds the transferable no-claims discount on a policy rather than its named drivers. Some insurers may recognise named-driver experience if you later take out your own policy with them, so check before buying.
What happens to my no-claims discount if an uninsured driver hits me?
It depends on whether your insurer can recover its costs as well as the specific terms of your policy - some policies include an uninsured-driver benefit that protects your no-claims discount in certain circumstances. Don't assume your no-claims discount is automatically protected just because the other driver was uninsured.
A claim can be treated as a fault claim for insurance purposes if your insurer cannot recover the money it paid, even where you did not cause the accident.
Does a windscreen claim affect my no-claims discount?
Not always - some policies allow certain windscreen or glass claims without reducing your no-claims discount, but this is policy-specific. Check the windscreen section of your policy to see how a glass claim is treated.
Do I earn another no-claims discount year after a non-fault claim?
Not necessarily - an additional no-claims discount year is normally awarded only when you have had no claims during that policy year. A non-fault claim may therefore leave the no-claims discount you already had intact without necessarily earning you another year's no-claims discount for that policy period.
What happens if I report an accident but don't claim?
Reporting an incident without making a claim shouldn't normally reduce your no-claims discount if your insurer doesn't have to pay anything. However, the incident can still be recorded and may affect the price you're offered in future.
You should still report incidents where your policy requires you to do so.
Can I build a no-claims discount on a company car?
Possibly - some insurers may recognise claim-free company-car driving when you move to a personal policy, particularly if you were the regular or sole driver. Ask your employer or fleet manager for evidence of your driving and claims history, then check whether your chosen insurer will accept it.
Can I transfer an overseas no-claims discount?
Sometimes - some UK insurers accept a no-claims discount or claims history earned overseas, while others do not. You might need evidence from your previous insurer in a specific format required by your new provider.
Author
Mehdi Punjwani
Insurance specialist
Mehdi is a financial writer and editor with over six years of experience in personal finance. He has written for organisations and publications including Equifax, The AA, and USAToday, covering a...
Reviewer
Sarah Tooze
Car & Van Insurance Expert
Sarah Tooze has been a motoring journalist for more than 15 years, specialising in company cars and vans, and has won a number of awards during her career, including the Newspress ‘Automotive...
