Find out how your no claims bonus can start to significantly reduce your car insurance cost after just one year of accident free driving, our insurance expert, Rebecca Goodman, explains.
There’s no escaping the fact that young drivers tend to pay the highest amount for car insurance, so if you’ve just passed your test, be prepared for a hefty bill.
But it’s not all doom and gloom; there are plenty of ways you can cut the cost of your insurance and free up cash to spend on more exciting things.
One of these cost-saving measures is a no claims bonus, or no claims discount – despite being called different things these work in the same way to reduce the amount you pay.
Here we talk about how a no claims bonus works (spoiler it’s not actually a bonus but a discount on your insurance bill), and how you can use it to lower your costs.
What is a no claims bonus?
You get a no claims bonus, or no claims discount (NCD), for every year you have car insurance but don’t make a claim. The more years you can rack up, the bigger the discount you could get on your car insurance bill.
How does a no claims bonus work?
To explain it fully, let’s look at an example. If your car insurance policy was about to end, and you were given a quote for £1,000 for the next 12 months but you had a no claims bonus of 20%, you could reduce your bill to £800. That’s a £200 saving just for not claiming in the previous year.
How much cheaper will my insurance be with a no claims bonus?
There’s no way to put a flat figure on how much cheaper your insurance will be, as it’ll depend on the size of your no claims bonus and the cost of your new insurance policy.
But if you have an NCD, you should be getting a cheaper policy than someone without one. So, if you have built up a bonus, it’s a win win.
Can I earn a no claims bonus if I’m on my parent’s insurance?
If you don’t have your own wheels yet, but you’re driving your parent’s car as a named driver, you might still be able to build up an NCD.
Keep in mind that this isn’t always the case, so you’ll need to check with the insurer first. You might find that they allow it but only if you stick with the same insurer for next year’s policy. When you do get your own car and policy, it’s game over. Well, not quite that dramatic, but your NCD will reset to zero and you’ll need to start building it up again from scratch.
How can I get proof of my no claims bonus?
Insurers might be willing to give you a discount, but they’ll want to see proof of your NCD first. To find that proof, grab a spade as you’ll need to do a little digging too.
Details of your no claims bonus might be listed on your car insurance renewal or cancellation letter or email. If not, they may have sent a separate letter or email to you with this in (insurers love letter writing), but if you still can’t see it, you’ll need to contact the insurer and ask directly.
What is no claims discount protection?
Say you’ve built up quite an impressive NCD and you’re looking forward to a cheaper car insurance bill but then you end up having an accident and need to make a claim. There is a way you might be able to keep some of your NCD and that’s by having no claims discount protection.
You’ll have to pay extra for it though, as it comes as a policy add-on. Before buying you’ll want to think about how big your discount is and if it’s worth paying for the extra. If you’ve only been driving a year or two, the sums might not add up. But if you’ve built up a big discount over a few years, it could be a good option.
What happens to my no claims discount if I make a claim?
Insurance is there to protect drivers, their cars, and other people on the road, so if you need to make a claim, your NCD shouldn’t stop you from doing this. But even if you do make a claim, you might not lose it altogether.
This depends on the insurer, but some may reduce the NCD slightly rather than wiping it out altogether. Usually this only happens once though, and if you make two claims you can say wave goodbye to your NCD – until you build it up all over again!
