Your no claims discount is a big part of deciding how much your annual car insurance premium will be. When you go a whole year without making a claim on your insurance, it implies that you are a safer driver. Your insurance company will not have to suffer from any financial loss that year, so you are therefore cheaper for them to cover. As the term ‘No Claims Discount’ suggests, drivers who make no claims are eligible for a discount on their yearly premiums. With most insurers this can be anything up to 80%.
No Claims Discount Explained
There are quite a few factors that will have an affect on your no claims discount. The biggest one is if you make a claim on your insurance. This will reduce your no claims discount and may even remove it altogether. If you wish, you can pay a but extra to keep your discount – which is known as ‘protecting’ your no claims discount. When you do this, it means that you can keep your discount even if you make a claim.
Another important factor is whether the insurance company can recover the costs of your claim from another party. For example, if a claim is made and the insurer is not able to recover the cost from another party, then you will lose either some or all your no claims discount.
No claims discounts cannot be earned on a single car and then split between two separate vehicles. In households with multiple vehicles, each vehicle with have its own separate no claims discount. If you change a car then it is possible to transfer your no claims discount to your new car.
You can also transfer your no claims discount if you choose to switch insurers. Your new policy and no claims discount may be different, but your number of years of no claims bonus will be retained and you should still receive a discount from your new insurer.
No Claims Discount Protection
No claims discount protection allows a policyholder to make a claim on their car insurance without losing their no claims bonus. There is usually a limit on the number of times that a driver can make a claim while still retaining the discount. This will vary between insurers, so it’s always worth checking.
When a driver has no claims discount protection, they are essentially paying an extra fee to protect the number of years of no claims discount that they have built up. It would be incredibly frustrating to have driven for say 5 years without a single minor bump or scrape, only to find yourself involved in an accident which would result in you losing your no claims discount.
An example of how valuable no claims discount protection can be, is if you have 5 years no claims discount with your insurer but you chose not to pay to protect it. You then go shopping and park in a supermarket car park, only to find that someone has reversed into your car and driven off. You would need to claim for repairs (as the liable party is not traceable) which would see that you lose your no claims discount. You’d then have to build it up all over again.
Is it Worth Protecting your No Claims Discount?
Everyone has their own personal situation and set of circumstances, so only the policyholder themselves will know whether it’s worth protecting a no claims discount.
The best thing to do is speak to your car insurance provider to determine how much extra it will cost you to protect your no claims discount. This amount might be affordable, or it might push the overall price of your policy above the maximum that you’re prepared to pay.
When you switch insurance providers and inform your new insurers that you have a certain number of years of no claims discount, then it is down to you to prove that to your insurance company. You will often be required to produce evidence of your no claims discount entitlement. Normally you will be given this at the end of your last full year of insurance when it is time to renew your policy. You can also call your insurance company and ask them for confirmation at any time.
When it comes to no claims discounts, not all insurance companies will have the same terms and conditions. For example, if you have 5 years of no claims discount with a provider and then you make a claim, one insurer could remove all your no claims discount entitlement whereas another may just reduce your entitlement to 2 or 3 years. It’s often well worth a conversation with your insurer to get to know all of the options when it comes to no claims discount entitlement and paying for protection.