Car insurance no-claims bonus

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.

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.

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:

1. 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.
2. 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.

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.

Bottom line

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.

Frequently asked questions

• Can named drivers build up no-claims bonuses?

  “Named drivers” are specifically listed on someone else’s car insurance policy and are covered to drive the main driver’s car. Some, but not all, insurers allow named drivers to build up their own no-claims bonus. If the named driver takes out their own policy with the same insurer, the bonus will be applied. Not all insurers will accept named-driver no-claims discounts that are transferred from another provider, though, so check this if you want to switch.

• What is an accelerated no-claims bonus?

  Usually, you have to have built up a full year of claim-free driving to get any no-claims discount. Some insurers offer schemes that let you build up your first year’s discount in 10 months, rather than 12. This can be useful if you are a new, inexperienced driver that’s facing high initial premiums, as it could see your insurance costs drop a little bit sooner.

• Do I need proof of a no-claims bonus?

  If you switch to a new insurer, it will often be able to get the records of your no-claims bonus from a centralised car insurance database. If so, you won’t need to directly supply proof.

  If it does need you to send it proof, your no-claims years will usually be stated on the renewal paperwork from your previous provider. If not, ask your former provider to send you proof that you can pass on to your new insurer.

• Can I transfer a no-claims bonus from overseas?

  Maybe – it depends on the insurer and the country you’ve built up the no-claims bonus in. If you’re looking to transfer a no-claims bonus you’ve built up in another country, once you’ve shortlisted providers that offer the cover you want, check with them whether they’ll accept transfers.

• What claims don't affect my no-claims bonus?

  Typically, if you’ve been involved in an accident that wasn’t your fault and the costs were paid in full by the other driver’s insurance, your no-claims bonus will be unaffected. Depending on the insurer, your bonus may also stay intact following:

  • Claims for glass damage, such as a cracked windscreen
  • Accidents that weren’t your fault, but where your insurer had to pay out because the other driver was uninsured

• Do I lose all my no-claims bonus after an accident?

  Not necessarily. If the accident wasn’t your fault and the other driver’s insurance pays in full for claims, your bonus shouldn’t be affected. If the accident was your fault and your no-claims bonus isn’t protected, you are likely to lose some or all of your bonus. How much you’ll lose depends on the insurer and how many years you’d already built up.

• Do no-claims discounts expire?

  Eventually, yes. If you sell your car and don’t drive (and therefore don’t have insurance), after a certain period you might find that it’s harder to find insurers that will honour your previous no-claims bonus. 2 years without insurance is a typical limit for most insurers.

  It could be worth approaching the insurer you used before you gave up driving. It might be more flexible than a brand new insurer. For example, it might reduce, rather than completely ignore, your previous no-claims bonus.

• How do I apply a no-claims bonus on a new car?

  If you replace your old car with a new one, you can apply the no-claims bonus you’ve already built up to your new vehicle. If you stick with the same insurer, it will take your no-claims bonus into account when calculating your revised premium for the new car. You may still see your price change (for better or worse) as the new car may increase or reduce your risk profile, even if everything else stays the same. If you switch to a new insurer for your new car, you’ll be able to transfer over any complete years of no-claims bonus.

• Can you have a no-claims bonus on more than 1 car?

  Yes and no. You can usually only apply a discount built up on a single car to 1 car at a time. If you buy a second car while continuing to drive the car you’ve already built up a no-claims bonus on, you usually won’t be able to also apply the discount you’ve built up on the first car to the second car.

  However, as soon as you take out insurance on that second car, you will start building up an independent no-claims bonus on it. This essentially means you will have separate no-claims discounts for each car.

  There are a handful of insurers that let you “mirror” your existing no-claims bonus onto a second car, provided that you insure both cars under the same multicar policy. It could be worth checking this and seeing if it works out financially better than insuring the cars separately.

• Do no-claims bonuses apply to work vehicles?

  It depends what type of policy you have. Typically, you can’t build up no-claims bonuses on exclusively commercial insurance policies. This includes, for example, fleet vehicles you drive under an “any driver” policy.

  If you’re the main driver on a policy and also use your work vehicle for personal reasons, you should be able to build up a no-claims bonus. Check the terms of the policy to be sure though.

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