Car insurance premiums aren’t cheap. Costs can run into thousands of pounds. Thankfully, there are ways to drive down the price of your car insurance policy – and one of the most effective is to build up a no-claims discount or bonus.
Discounts if you don't claim
If you don’t claim on your car insurance, the insurer doesn’t have to pay out. You are therefore a less risky customer, so cover is cheaper. Most insurers offer discounts to drivers who don’t claim. The size of the car insurance no claims bonus varies but you could knock up to 75% off your premium if you can manage five consecutive claim-free years.
It is therefore worth considering paying for any minor damage out of your own pocket in order to safeguard your no-claims discount. For example, you scratch the paintwork of your car when reverse parking and the garage quotes £300 to fix the damage. Your excess is £250, so if you were to claim on your policy, the insurer would pay out only £50. You would also lose your car insurance no claims bonus of 25%, which is worth about £75. In other words, it would cost more to claim than to pay the garage bill.
Some claims do not affect your car insurance no claims discount. Repairs to your windscreen, for example, usually have no impact on your no-claims bonus. And if you claim for damage to your vehicle following an accident that was not your fault, your insurer should be able to recover any costs from the other driver’s motor insurance company, so again your record of no claims should remain intact. However, if you are involved in an accident with an uninsured driver, it could affect your history of no claims.
Building up no claims discount
Named drivers might not be able to build up their own discount, but they can affect the NCD of the main driver
You can build up a car insurance no claims discount (NCD) on most types of motor insurance policy, including third party, third party fire and theft and comprehensive. You should, however, check the details if you buy temporary cover as it does not always apply.
The no-claims discount usually only accrues to the main driver. If you are named on someone else’s policy as an additional driver, you cannot normally build up your own bonus. Some insurers will recognise the claims history of named drivers, but only if they stick with the same firm when they eventually buy their own policy.
Named drivers might not be able to build up their own discount, but they can affect the NCD of the main driver. Let’s say your son is a named driver on your car insurance. If he has an accident that is his fault and which leads to a claim, it could jeopardise your own bonus. It’s something to bear in mind if you add any other drivers to you policy, particularly younger, less experienced motorists.
It pays to shop around
Don’t forget that a no-claims discount does not shield you from premium rises. The price of cover can still increase each year, even if you don’t make a claim. It is therefore important to shop around at renewal instead of automatically sticking with the same insurer. MoneySuperMarket’s comparison service makes it easy to compare cheap insurance quotes available through over 139 different car insurance providers.
You can take your car insurance no claims discount with you when you switch insurers. The discount might not be the same, but the new firm should honour your claims history. You can also transfer your NCD to another vehicle, perhaps if you buy a new car.
Using this MoneySuperMarket tool, you can find out how the leading car insurance providers approach the subject.
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Maximum number of
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
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.
It usually takes five years to build up the maximum car insurance no claims discount - which is a long time to wait for cheaper premiums. Some insurers therefore run accelerated bonus schemes that allow you to earn your first year’s discount in 10 months rather than 12. The schemes can be particularly useful to younger drivers who tend to pay higher premiums than older motorists.
Protecting your no claims
Motorists can pay extra to protect their no-claims discount, allowing them to make a number of claims within a year without jeopardising their NCD – and it can be worth the money. Drivers who make a claim with five years of ‘unprotected’ no-claims discount can expect their premiums to rise by as much as 30%, according to research by MoneySuperMarket. However, the cost of cover would increase by only 8% if the NCD were protected.
It costs on average £23 to protect a five-year no-claims discount, but the price can vary widely between insurers, ranging from around £4 to over £34. Motorists should also bear in mind that the longer they protect the discount and do not make a claim, the less cost-effective the protection.