Car insurance no-claims bonus
Can your no-claims bonus help you get cheap car insurance? Here's what you need to know.
Making 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 making a claim, the bigger the discount you’ll be eligible for on your car insurance premiums? We explain how car insurance no-claims bonuses work and how you can use them to get the best value on your car insurance.
What is a car insurance no-claims bonus or discount?
A car insurance no-claims bonus, or discount, is a percentage discount on your car insurance premium. You get it in exchange for not making any claims for at least a year of driving. The more years that go by without your insurer having to pay out for a claim, the bigger the discount you’ll qualify for – up to a maximum limit.
It’s a bonus that makes sense. Car insurance claims can be very expensive for insurers, particularly if an accident that you’ve caused damages someone else’s vehicle as well as your own. If having you as a customer doesn’t cost an insurer money, it can afford to reward you with a discount.
An important point to make upfront: There are lots of risk factors other than claims history that affect your insurance premium each year. A no-claims bonus is only a discount on your baseline premium. It’s not a guarantee that you’ll see costs go down year-on-year.
How do I build my no-claims bonus?
Good news – if you hold an annual car insurance policy, you don’t need to proactively do anything to start building a no-claims bonus. Each year you hold car insurance and don’t make a claim, the bonus builds up automatically. In theory, all you need to do to keep that annual bonus ticking up is to not make a claim.
If you do make a claim, you may well lose some or all of the bonus you’ve built up.
Another piece of good news, though. Generally, your discount won’t be reduced for claims where you were not at fault. So if, for example, you are involved in an accident with another car and the other driver admits fault, most insurers won’t reduce your no-claims discount.
The exact types of claim you can make without losing your discount will be different depending on the insurer.
What is the maximum no-claims bonus I can get?
Most insurers cap the number of years you can build up a no-claims discount for. This typically ranges from 5–15 years depending on the insurer. Once you hit the limit, the level of discount will stop increasing.
The maximum discount will also vary – though a higher cap on the number of years doesn’t necessarily mean a bigger discount. This is because different insurers increase the level of discount at different rates. The rate of increase isn’t necessarily linear, either. You may get bigger discount increases in the first few years than you will further down the line, for example.
According to the Association of British Insurers (ABI), if you’ve managed to go 5 or more years without making a claim, you could save up to 60% on your premium. Even having just 1 year’s no-claims bonus could shave off up to 30% the following year.
What type of claims affect my no-claims bonus?
Put simply, “fault” claims will affect your no-claims bonus and “non-fault” claims typically won’t.
Unfortunately, it’s not quite as simple as this insurance jargon suggests. Being at “fault” doesn’t necessarily mean you caused an incident. Usually, it’s to do with whether or not your insurer has to pay. Say a careless driver scraped your parked car. Unless they could be traced and their insurer made to pay, your insurance claim would likely be a “fault” claim.
Meanwhile if you are involved in an incident with another driver where liability can’t be agreed, and insurers share costs, you may both be marked down as “at-fault”.
Fault claims, unlike non-fault claims – where your insurer doesn’t pay out – usually reduce your no-claims discount.
There are some exceptions to this rule though. For example, some insurers won’t reduce your no-claims discount if you were involved in an accident caused by an uninsured driver. And many insurers won’t apply penalties following glass damage.
How can claims affect my no-claims bonus?
If you’ve built up several years of no-claims discount, a fault claim won’t necessarily see it fully wiped out. Many insurers will reduce the number of qualifying years after a single claim. However, a second claim in quick succession could bring you back to zero – or perhaps a year or 2 if you had 5 or more years of no claims to start with.
The table below gives an idea of what typically happens to your bonus after 1 or 2 claims in an insurance period.
|NCD years at outset||Number of claims in insurance period||NCD years after claiming|
|9 years||1||3 years|
|9 years||2||1 year|
|5 years||2||1 year|
|5 years||2||1 year|
|3 years||1||1 year|
|3 years||2||0 years|
What is a no-claims bonus worth?
A good no-claims bonus is well worth having. It can see you paying much less than you would otherwise. But the biggest percentage discount is only worth having if the underlying price is right. As the table below shows, a 40% discount on a £500 premium will see you paying more than a 30% discount on a £400 premium.
|Insurer 1||Insurer 2|
|No-claims discount %||40%||30%|
|Amount of discount||£200||£120|
|Premium after discount||£300||£280|
So don’t be swayed into choosing, or staying with an insurer just because it markets a high no-claims discount percentage. Compare quotes based on your circumstances, including your years of no claims. Opt for the most affordable policy that meets your needs.
Should I claim for minor damage?
If the damage from an incident is very minor – a paint scratch or a dented bumper, for example – it might be worth paying for the repairs yourself rather than claiming. There are a couple of reasons for this:
- The cost of repairs may only be a little higher than your insurance excess, so making a claim wouldn’t get you much of a refund.
- The negative impact on your no-claims bonus could mean your premiums rise a fair bit when you renew.
You should still tell your insurer about any accidents, even if you don’t make a claim. If you don’t tell your insurer, but it later finds out about the accident (perhaps because you need to make a claim for more major repairs and the mechanic spots the previous patch-up), it could invalidate your car insurance.
The benefits of not making a claim
The table below shows how an increasing number of claim-free years can help keep your car insurance premiums down. We’ve shown 2 scenarios for the same driver. Each of our 2 hypothetical insurers offers different baseline premiums and different levels of no-claims bonus.
We’ve assumed that the baseline premium increases by 5% each year to take account of inflation and other external factors. In practice, external factors and changes to a driver’s personal circumstances (such as where they live or the car they drive) may affect baseline premiums more dramatically.
- With insurer 1, the baseline premium is lower. The no-claims discount available is also lower each year and capped at 40% after 7 years.
- With insurer 2, the baseline premium is higher. The no-claims discount is also higher each year and continues increasing up to 70% after 9 years.
In both scenarios, claim-free driving can make a big difference to insurance premiums. However, which insurer is cheaper changes over time. This illustrates how important it is to take into account the final quote and not focus unduly on the size of a no-claims discount.
|Years of no claims||Baseline premium||NCB amount||Premium after NCB|
|Years of no claims||Baseline premium||NCB amount||Premium after NCB|
Can I transfer my no-claims bonus if I switch insurers?
Yes, you can almost always transfer your no-claims bonus when you switch car insurance. Your previous provider should provide proof of your no claims at the end of your policy term. You can give this to your next provider as proof, if required. Sometimes it’ll be able to get this automatically from an online database, without you needing to send anything.
Some insurers won’t accept no-claims bonuses you’ve built up as a named driver with another insurer. Check your chosen insurer before taking the plunge.
Bear in mind that your new provider may have a lower maximum no-claims discount than your old provider. If this is the case, you’ll only get the maximum discount that your new provider offers. But regardless of the discount, if the baseline premium is significantly better, it’s probably still worth switching.
Is a no-claims bonus worth staying with my provider for?
If your insurer offers a very high no-claims discount and you’ve built up a full number of no-claims years, then you might find it harder to find an insurer that will offer the same level of discount.
But don’t let this stop you considering other options. The key to cheap car insurance is to shop around and to take your business elsewhere if you find a better deal. A smaller discount on a lower baseline premium could work out cheaper than a bigger discount on a pricey premium.
It always pays to know what your options are and what other deals are out there. Compare providers when it’s time to renew. If another provider offers the right cover at a better price, then switch.
Will a no-claims bonus stop my insurance premiums rising?
Not necessarily. Even if the level of discount you’re eligible for increases year-on-year, it doesn’t guarantee that your premiums won’t rise for other reasons.
For example, if you were involved in an accident that wasn’t your fault, your no-claims discount won’t be affected. It will increase in line with your insurer’s terms when your policy renews (provided you haven’t already reached your provider’s maximum level). However, the very fact you’ve been involved in an accident – even one you didn’t cause – will increase your risk level in your insurer’s eyes. This means your baseline premium is likely to go up.
Some factors that affect your premiums are outside of your control. For example, changes to regulation or taxes can add to the cost of car insurance across the board.
If you’re a safe driver who’s had no claims or accidents in years, you deserve to save money on your premiums. While insurers are not obliged to offer no-claims bonuses, the vast majority do. These discounts can make a big difference to your car insurance premiums. They’re well worth having and, in some cases, protecting. Don’t assume that the biggest discounts automatically make for the lowest premiums, though. Some insurers may be cheaper overall despite offering lower discounts.
Always compare policies based on the level of cover they offer and the final price you’ll be charged, taking into account any no-claims bonus. Visit our comprehensive guide to car insurance to learn more about car insurance, including policy terms, coverage options, rates and discounts.
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