How does a home insurance no-claims discount work?
Home insurers reward you for not claiming on your home insurance by offering a no-claims discount, which gives you money off your annual insurance premium.
It works in the same way as a car insurance no-claims bonus, in that you receive a discount – also known as an NCD – which grows a little for each successive year you don’t make a claim. The more years you go without claiming, the greater your NCD will be and the more you’ll save on your home insurance.
NCDs are designed to deter people from making a claim every time something small goes wrong.
How big a no-claims discount will I get?
The value of the no-claims discount you’ll be offered will depend on which insurer you’re with. Some, for example, offer a discount of 20% or 25% after the first year, with a higher discount once you’ve made no claims for multiple years. Others start at 10% or 15%, perhaps rising up to 50% or even higher after five years.
Insurers will typically offer increasing reductions for each year you don’t claim for up to five years, although in some cases this may be up to seven years.
Can I transfer my no-claims discount to a different insurer?
Most insurers will accept no-claims discounts which have been built up with other home insurance providers. If you decide to switch insurers because you’ve found a better deal elsewhere, you’ll usually be able to take your NCD with you.
What happens to my no-claims discount if I make a claim?
Making a claim on your home insurance will usually mean you lose your no-claims discount but check your policy small print to understand which claims will affect your NCD.
If you’ve built up a significant no-claims bonus over the years, you’ll need to carefully consider whether you’d be better off covering the cost of any smaller issues yourself rather than making a claim.
If you make a claim, your annual premium is likely to rise anyway, and coupled with the loss of a long-standing NCD, it might end up costing you more to make a claim than it would to pay for repairs on your own.
How can I protect my no-claims discount?
Some home insurers allow you to protect your NCD for an extra fee, provided you’ve already built up four or five years without making claims. This may enable you to make one or two claims during your policy term without it affecting your NCD.
The other way to protect your no-claims discount, of course, is simply not to make a claim on your home insurance.
Here are some of the ways you can use to reduce the chances of having to make a claim:
- Install additional security measures at your home such as an alarm, window locks and security lighting to deter burglars
- Take steps to protect your property from weather damage, for example, by securing any loose tiles and guttering
- Ensure pipes and water tanks are insulated so that they don’t freeze in the winter and break
- If you live in an area that’s prone to flooding, keep a supply of sandbags to hand to block off your doorway during periods of heavy rain so that you can prevent as much water as possible from getting into your property
Does claiming on my contents insurance affect the NCD on my buildings insurance?
However, if you make a claim on either policy, it won’t usually affect the no-claims discount on the other. As policies can vary widely, however, it’s a good idea to check the documentation before you make a claim, just in case.