No claims discount explained

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The no-claims discount you get on your car insurance is a reward for safe driving – and can cut the cost of your car insurance by as much as 75% with most insurers. So it’s good to know that you can take your discount with you when you switch insurers. 

How many no-claims discount years will my new insurer honour?

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Maximum number of
NCD years

With most insurers, the size of discount you can achieve increases until you have built up five NCD years, at which point the maximum discount percentage is achieved. Despite this, some companies continue to recognise if you go further years without making a claim - but they don't increase the size of your discount (or at least not by much).

However, it can still be helpful. If your insurance company recognises up to, say, nine years of claims-free driving and you have an accident, you might lose two years and drop back to seven. As that's still higher than five, making a claim would not jeopardise your discount.

Other companies will always drop you back to three years after an accident, regardless of your number of years claims-free.

Maximum No Claims
Discount

The amount of discount earned increases with each year of claim-free driving.

So after one year you might get 30%, with the percentage increasing each year until you get 70% NCD after five years.

Most firms offer a maximum NCD of 70%, although some offer 75% or 80%.

Does it have an
Accelerated Bonus Scheme?

Some insurance companies offer drivers with no NCD an accelerated bonus scheme, which awards a year's NCD after 10 months claims-free driving.

After 10 months, you can either renew with the same firm, or move to another firm with the one-year bonus intact.

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Understand your no claims discount

 

Here’s how it works. Most insurers offer a premium discount for every year without a claim, usually up to a maximum of five years. For example, you might earn a 30% discount on next year’s premium, if you do not make a claim in the previous year. Drivers who can boast five consecutive claim-free years can expect a discount of as much as 75% - or even more in some cases. The size of the discount, sometimes called a bonus, varies from insurer to insurer. Companies also calculate the discount in different ways. A number of firms even allow the discount to build up over 10 years or offer an ‘accelerated’ discount or bonus, where the discount applies after 10 months instead of 12.

Making a claim

It’s worth finding out what would happen to your discount if you put in a claim as you won’t necessarily forfeit the full amount. For example, if you have built up a discount over five years and make a claim in year six, you might lose only two years of discount. So, when you come to renew your car insurance, you would benefit from a three-year bonus. Remember that your insurance premium can still go up at renewal even if you don’t make any claims. That’s because the driver’s claims history is only one element in the premium calculation. Insurers also take into account factors such as your address and mileage, when they quote for cover. That’s why it’s always important to shop around when you renew, to make sure you’re getting the most competitive price for the cover you want.

The no claims discount can clearly be valuable, which is why many motorists pay to protect their bonus. This means paying an additional amount of premium so that you can make one or two claims in a year without losing the discount.

Discount portability

Changing your car, should not affect your discount, and neither should changing insurer – the new firm will simply as for evidence of your driving record from your previous insurer. In many instances, the annual renewal letter is often enough, although we’ve received many reports of problems arising in obtaining proof of no claims discount, which has caused problems getting the reduced premium with the new insurer.

If this has happened to you, or you have any questions about no claims discounts, drop us a line in the box below.

Named drivers

It’s worth mentioning that the rules for ‘named drivers’ are a bit different. A named driver is on the policy but is not the main driver. Often, it’s the policyholder’s spouse, son or daughter – someone who drives the car occasionally. Named drivers do not always automatically build up a no-claims discount. Some insurers, however, allow named drivers to accrue a bonus, though it is usually at a lower rate. It might not be transferrable to a new policy and might only be recognised if and when the named driver takes out their own insurance policy with the same firm.

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