Everyone knows that car insurance premiums aren’t cheap. The average price for an annual fully comprehensive policy was £592* in December 2017.
Thankfully, there are several ways to drive down the price of your car insurance – and one of the most effective is to build up a no claims discount (NCD) or bonus.
Discounts if you don't claim
Most insurers will offer no claims discounts to drivers that don’t claim on their car insurance. They do this because motorists who don’t claim on their policy are considered less risky, and so the cost of their premiums fall.
The size of the car insurance no claims bonus varies between providers, but you could knock up to 75% off your annual premium if you can manage five consecutive claim-free years (some companies can offer even bigger discounts of up to 85%, but you would have to check your policy).
You should be aware that some insurers will cap the number of NCD years you can earn, too. But insurers have different rules regarding no claims discounts, which tends to make it more complicated.
Will each claim affect my no claims discount?
If you make a claim on your car insurance and your insurer pays out, you’ll lose some or all of your no claims bonus.
If you make a claim and both you and the other driver are at fault – or both parties can’t agree on who is liable – the two motorists may see their no claims bonus affected.
It’s more complicated if you’re involved in an accident with an uninsured driver and need to make a claim. Where one insurer may protect your NCD, another could wipe your history of no claims – so always keep this in mind when you compare car insurance policies. If it looks like your no claims discount will be affected, you should approach the Motor Insurance Bureau.
However, if you claim following an incident that wasn’t your fault, your no claims discount should remain intact. Other things, like claiming for repairs to your windscreen, for example, usually have no impact on your no-claims bonus.
And if you have more than five years of no claims discount but you need to claim after an accident, you may not necessarily lose all of your no claims discount, but just two or three years’ worth of the bonus.
What about minor damage?
If we take your no claims discount into account, it’s probably worth considering paying for any minor damage out of your own pocket. This will save you losing any of your NCD.
For example, imagine you scratch the paintwork of your car when parking and a garage quotes £300 to fix the damage. The voluntary excess on your policy might be £250, so if you were to claim on the policy, the insurer would pay out only £50.
When you consider you would also lose around 25% your no claims discount (which could be worth £200 or more), it would cost more to claim than to pay the garage bill directly.
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 your car insurance no claims discount on most types of motor insurance policies, including third party, third party fire and theft and fully comprehensive. You should, however, check the details if you buy temporary cover as it does not always apply.
[Quote] – “Named drivers might not be able to build up their own discount, but they can affect the NCD of the main driver.”
A no-claims discount generally only accrues to the main driver, so if you are a named driver on someone else’s policy, you can’t build up your own bonus. Some insurers will recognise the claims history of additional drivers, but only reward no claims discount if and when they buy their own policy with the same insurer.
It must be noted that while named drivers might not be able to build up their own discount, they can affect the NCD of the main driver. Let’s say, for example, that your son or daughter is a named driver on your car insurance. If they were to have an accident and they are at fault and it leads to a claim, it could jeopardise your own bonus.
It’s definitely something to bear in mind if you add any other drivers to you policy, particularly less experienced motorists.
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 run accelerated bonus schemes that allow you to earn your first year’s discount in 10 months rather than 12, a bonus on a bonus.
This type of scheme can be particularly useful to younger or less experienced drivers, who typically pay higher premiums than older and more roadworthy motorists.
Protecting your no claims
If you choose to, you can pay extra to protect your no-claims discount. This allows you 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 within five years 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 no claims discount were protected.
Plus, protecting a five-year no claims discount isn’t too expensive. The price is based on a percentage of your premium and so can vary widely between insurers. You can get the NCD protection from around £5 if you have a low insurance premium to around £50 on a more expensive policy.
Motorists should bear in mind though, that the longer they protect the discount and do not make a claim, the less cost-effective the protection. It eventually begins to decrease the savings you could make.
It pays to shop around
Be aware that a no claims discount does not shield you from premium rises. The price of car cover can, and probably will, still increase each year - even if you don’t make a claim.
It’s therefore important to shop around at renewal instead of automatically sticking with the same insurer. MoneySuperMarket makes it easy to compare cheap insurance quotes from over 139 different car insurance providers.
When you’re looking for quotes, make sure you give detail of any no claims years that you’ve earnt, because you can take your NCD to a new insurer. The discount might not be the same, but the new firm should honour your claims history. You can also transfer your no claims discount to another vehicle, perhaps if you bought a new car.
*MoneySuperMarket data. Correct as of December 2017.