What is a no-claims discount, and what should I know about it?
Filing an insurance claim is sometimes necessary to cover the costs of damages or injuries after an accident.
But did you know that the longer you go without filing a claim, the more likely it becomes that you’re eligible for discounts on your insurance costs? Read on to find out how you these kinds of discounts work, and how you can use them to get the best value on your coverage.
Get quotes from providers with discounts
Shopping around is the key to cheaper car insurance. To help you get the best price, you might get quotes with an eye to the underwriters used by different insurers.
How does the no-claims discount work?
No-claims discounts works like this:
- Each year you hold car insurance and don’t make a claim, you might become eligible for a discount. For example, the no-claims discount for Esurance kicks in after 3 years of good driving.
- Also known as the ‘Good Driver’ discount, depending on your provider.
Generally, your discount won’t be reduced for claims where you were not at fault. This means you can still make weather-related claims or accident claims where the other driver was clearly at fault without losing your no-claims discount.
The exact types of claims you can make without losing your discount will be different depending on the insurer, so it’s a good idea to look at this if you’re planning on growing a no-claims discount.
When you switch car insurance, it’s also worth looking at whether your new insurer will recognize your no-claims discount and clean driving record.
What kinds of claim-free discounts are there?
Because discount types and terms vary between providers, we’ve outlined a few different ways you can get a discount for keeping your claims to a minimum. Not all kinds of discounts are available everywhere in the US. To find out if one of these discounts is available where you live, contact your provider, or include these discounts in your must-have list when you’re shopping for a new policy.
Safe driver discount or disappearing deductible
With this kind of discount, you’ll get a rate break as long as you’re not involved in any accidents. For some insurance providers, like Allstate, you can take $100 off your deductible and even get a cash discount for each year you’re accident-free.
This kind of discount also allows for claims not related to safe driving, such as theft, vandalism or inclement weather damage like hail and lightning, without affecting your eligibility for a safe driver discount.
No claim or claim-free discount
Some companies, like Esurance, will give you a discount of up to 20% off your premiums if you maintain your policy with no accidents or claims for five years. This is the most direct kind of claim-free discount, but it also takes multiple years of safe driving and consistent coverage to qualify.
While it might not technically be a discount, this policy feature is a reward for maintaining your coverage and being claim-free, often for two or three years. When you’re in an accident, especially one that requires you to file an insurance claim, you often see your rates increase to cover the slight jump in risk to the provider; this discount protects the driver from any increase in cost because of the track record for safe, claim-free driving.
Is the no-claims discount worth it?
One of the big questions to ask yourself before taking out car insurance is whether you even want to bother with the no-claims discount.
It’s a discount, but the obvious downside is that you’ll risk losing it if you have to make a claim, so it might stop you from getting full use out of your car insurance. However, there’s another sneaky downside too.
The problem with no-claims discounts
The key to cheap car insurance is to shop around, and take your business elsewhere if you find a better deal. A no-claims discount can get in the way of this. If you’ve worked hard to grow your discount, then you might find it harder to switch to an insurer that will recognize your discount the same way. This means your insurance options are a lot more limited.
If you can find better value elsewhere, then a no-claims discount might be holding you back and actually leading to higher premiums than what you could get by shopping around. Either way, it pays to know what your options are and what other deals are out there.
Pros and cons of using a no-claims discount
- Can get you a significant discount
- Can be protected with various coverage options
- Will not necessarily be lost if you have to make a no-fault claim
- Might prevent you from effectively shopping around or accessing other discounts
- Limits the range of policy types, options and insurance brands available to you
- No-claims protection options come at an extra cost
- Policies that feature a no-claims discount are not necessarily the most cost-effective options
- Even with a protected no-claims discount, your premiums are still likely to increase following an accident
- You lose your no-claims discount after going for an extended time without car insurance
Car insurance providers with claim-free discounts
These providers give discounts to their customers, in one form or another, based on how long a driver goes without making a claim. Some are more direct than others, and some take upwards of five years to begin saving the driver money.
- Allstate. Safe driver discounts could save you up to $200 or 15% each year, and accident forgiveness prevents rates from going up even after an insured driver is found at fault for an accident. How many accidents are forgiven depends on your level of coverage.
- Esurance. Start saving up to 20% on your premiums when you maintain claim-free coverage for five years or more — available in 10 states, most recently including Pennsylvania. Since Esurance’s merger with Allstate Insurance in 2011, the brand’s offerings are expanding; check with an agent or a provider representative to learn more.
- Progressive. This provider has a loyalty rewards program that helps customers keep their rates down when claims are resolved quickly and at low cost; you could see a 10-15% reduction in your premiums by staying claim-free for more than 5 years.
- USAA. USAA offers accident forgiveness on policies for as little as $1 extra per month that’s available in most US states.
- Nationwide. Accident forgiveness only applies to one accident per policy, but it can include other drivers on the policy rather than just the policyholder. This provider also offers disappearing deductible discounts for safe drivers, with a reduction limit of $500.
- Liberty Mutual. While Liberty Mutual only covers the first accident on a policy, it does comes standard on all policies except in North Carolina and California.
- Geico. Geico awards certain longtime customers with accident forgiveness upon reaching milestone coverage anniversaries. For more information on this, contact an agent or representative about the options in your area. Qualified customers can also purchase accident forgiveness as an add-on to their policy.
- The Hartford. Qualified customers with the Advantage Plus policy package will be eligible for accident forgiveness. Policyholders can also get a $50 reduction in their deductible for every year they go accident-free.
Is it worth paying to protect a no-claims discount?
A protected no-claims discount is an extra-cost option you can add to your coverage. It works differently depending on the insurer, but generally it will let you make up to two claims without losing your no-claims discount.
Your insurer will typically offer this once you’ve been with them for at least two years without a claim.
Whether you choose to get it is entirely up to you, but you should note the following:
- This feature simply protects your discount, and your premiums are still going to increase following a claim.
- It makes your car insurance more expensive since you are paying to keep a discount.
- It’s only available when you stick with the same insurer for a while.
Like the no-claims discount itself, this feature encourages people to stick with the same insurer, or group of insurers, rather than shop around.
For a fairer comparison, you might want to factor this into the prices when you’re comparing car insurance quotes.
If protecting your no-claims discount means you’re paying more for car insurance than you would with a provider that doesn’t offer this discount at all, then it might be time to make a switch.
If you’re a safe driver who’s had no claims or accidents in years, you deserve to save money on your premiums.
But when it comes to discounts for staying claim-free, not all providers are created equal — and by comparing the discounts of several insurance companies, you could find a truly great value on your coverage.
Visit our comprehensive guide to car insurance to learn more about car insurance, including policy terms, coverage options, rates and discounts.