What is a no claims bonus and how does it work?
A No Claims Bonus (NCB), sometimes called a No Claims Discount (NCD), is a reward offered by insurance providers to drivers who haven’t made a claim on their car insurance policy. It’s essentially a way to say, “Thanks for being a low-risk driver!”
The bonus is applied as a percentage discount to your annual premium. The more years you drive without making a claim, the greater your discount becomes. For example, after one claim-free year, you might save 10-15% on your renewal. After five or more years, this could climb to 60% or more!
For many drivers, an NCD is a vital part of reducing car insurance costs. It’s a financial incentive that rewards careful driving, helping insurers manage risk while keeping premiums lower for those with a proven track record of being claim-free.
Interestingly, not all no-claims discounts are created equal. Each insurer calculates the discount differently, and maximum savings vary depending on the provider. Some insurers cap the discount at five years, while others may extend it to seven or more.
What does a no claims bonus do for your insurance?
A No Claims Bonus (NCB) is one of the most effective ways to lower your car insurance premiums. By driving claim-free, you demonstrate to insurers that you’re a low-risk policyholder, which translates into significant savings on your annual premium.
The primary function of an NCD is to act as a reward system. For every year you avoid making a claim, your insurer offers a discount on your renewal price. The savings can be substantial; some drivers save over 50% after just a few years of claim-free driving. This discount accumulates year-on-year, but most insurers cap the maximum bonus at five to nine years.
By reducing the cost of insurance, an NCD encourages safer driving habits and gives drivers a tangible reward for avoiding accidents and claims. It’s a win-win: insurers minimise risk, and careful drivers save money.
Here’s how a typical no-claims discount might look:
| Years Claim-Free | Discount Percentage |
|---|---|
| 1 Year | 10-15% |
| 3 Years | 30-40% |
| 5 Year | 50-60% |
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Get QuotesHow do you build a no claims bonus?
Building a No Claims Bonus (NCB) is straightforward: avoid making claims on your car insurance policy for a full policy year. Each consecutive year you remain claim-free adds to your NCB, leading to greater discounts on your premiums.
To start earning a no claims discount, you need a valid car insurance policy and, most importantly, safe driving habits. Here are the key steps to building your NCD:
- Drive Safely: Avoid accidents and incidents that could lead to claims.
- Opt for Minor Repairs Yourself: If the cost of repairs is small, it may be cheaper in the long run to pay out of pocket rather than risk losing your NCD.
- Avoid Fraudulent Claims: Even minor false claims can void your bonus and lead to higher premiums.
However, accidents aren’t always avoidable. If you need to make a claim, insurers may reset your bonus to zero unless you’ve opted for No Claims Bonus Protection (more on that later). It’s also worth noting that building an NCB takes time. Typically, you’ll earn one year of discount for each full year you remain claim-free. Some insurers even reward partial years under certain circumstances.
Even if you’re a named driver on someone else’s policy, some insurers allow you to transfer that experience toward your own NCB when you get your own policy. Always check the fine print when switching providers.
Do all insurers offer no claims bonuses?
The majority of car insurance providers in the UK offer No Claims Bonuses (NCBs) or No Claims Discounts (NCDs) as part of their policies. However, the exact terms and benefits can vary between insurers.
Most insurers recognise NCBs as a valuable incentive to reward low-risk drivers and encourage safer driving. While it’s a standard feature of many policies, not all car insurance companies structure their NCD scheme the same way. For example:
- Maximum Discounts: Some insurers cap discounts after five years, while others allow up to nine years or more of claim-free driving.
- Percentage Savings: The percentage saved through an NCB differs; one insurer might offer a 50% discount after five years, while another could offer 65%.
- Policy Types: Comprehensive policies almost always include NCB benefits, but third-party-only policies may not. Always confirm this when comparing plans.
When switching insurers, make sure your new provider honours your existing NCB. Most insurers require proof, such as a renewal notice or letter from your previous provider, to validate your claim-free history. Without this, you may lose your discount.
Why should you protect your no claims bonus?
Protecting your No Claims Bonus (NCB) ensures that your hard-earned discount remains intact, even if you need to make a claim. Without protection, a single claim can significantly reduce or even reset your bonus, leading to higher premiums at renewal.
No Claims Bonus Protection is an optional add-on offered by most insurers, allowing you to preserve your NCB under certain conditions. While it doesn’t prevent your premium from increasing after an accident, it ensures your bonus isn’t wiped out. Here’s why it’s worth considering:
- Peace of Mind: Accidents happen, even to the safest drivers. With protection, your years of claim-free driving won’t be erased due to an unavoidable incident.
- Financial Stability: Losing an NCB could increase your premiums significantly. Protection minimises the long-term financial impact.
- Multiple Claims Allowed: Some policies allow a certain number of claims within a specified time frame (e.g., two claims in three years) without affecting your NCB.
Did you know an unprotected NCB can drop drastically after just one claim.
For example:
| Years of NCB | Before a Claim | After One Claim (Unprotected) |
|---|---|---|
| 5 Years | 60% Discount | 2-3 Years of NCB Left (30-40%) |
| 3 Years | 30% Discount | 0-1 Year of NCB Left (0-10%) |
What happens to your no claims bonus after an accident?
If you make a claim on your car insurance, your No Claims Bonus (NCB) can be reduced or completely lost unless you have NCB protection. The exact impact depends on your insurer’s policy and the circumstances of the claim.
For unprotected NCBs, insurers typically lower your discount after a claim. For instance, if you have five years of NCB, an at-fault claim could reduce this to two or three years, depending on the insurer. Multiple claims in a single policy year can cause even greater reductions.
Not all claims will impact your NCB. Non-fault claims (e.g., when another driver is at fault and their insurer covers the costs) usually don’t affect your NCB. However, if your insurer cannot recover the costs from the third party, it may still count as a claim against you.
Even with NCB protection, your premium may still increase after an accident, as insurers take your claims history into account when calculating risk. The protection only shields your discount, not the base price of your insurance.
Here’s a typical scenario:
| Years of NCB Before Claim | After One Claim | After Two Claims |
|---|---|---|
| 5 Years | 2-3 Years | 0-1 Year |
| 3 Years | 1 Year | 0 Years |
How can named drivers affect a no claims bonus?
Named drivers can impact a No Claims Bonus (NCB) in both positive and negative ways, depending on the insurer’s policy and how the claim is handled. Typically, named drivers cannot earn their own NCB, but their claims may affect the policyholder’s discount.
When you add a named driver to your insurance policy, any claims made by them are treated as claims on the policyholder’s insurance. This means the policyholder’s NCB may be reduced or reset if the named driver causes an accident and a claim is made.
Example: If a parent adds their child as a named driver and the child causes a collision, the parent’s hard-earned NCB may be impacted, potentially leading to higher premiums at renewal.
However, some insurers offer special arrangements:
- Named Driver Discounts: While rare, some insurers allow named drivers to earn their own NCB while driving under someone else’s policy. This can later be transferred when they take out their own policy.
- Accident Forgiveness: Certain policies offer accident forgiveness, where minor claims made by named drivers don’t affect the policyholder’s NCB.
Many insurers allow named drivers to use the policyholder’s NCB protection if it’s included. This means a claim by the named driver might not reset the discount entirely, but the policyholder may still face increased premiums due to the claim history.
Do no claims bonuses expire over time?
Yes, No Claims Bonuses (NCBs) can expire if you’re without car insurance for an extended period.
Most insurers allow you to retain your NCB for up to two years after your policy ends, but this timeframe varies depending on the provider.
If you take a break from driving or owning a car, your NCB doesn’t last indefinitely. Typically, insurers set a limit of 12 to 24 months, after which your bonus is no longer valid. For example, if you sell your car and stop insuring it, you may lose years of discounts if you don’t take out another policy within that period.
Important: Some specialist insurers or providers may have shorter retention periods, such as only 12 months. Always confirm this detail before taking a break from insuring a vehicle.
Scenarios to consider:
- Moving Abroad: If you’re driving overseas, check if your insurer will allow your NCB to be transferred back when you return to the UK.
- Using a Company Car: If you’re switching to a company car, ask your employer to provide a written statement confirming no claims were made during your time driving it. Some insurers accept this to maintain your NCB.
- Returning After a Gap: If your NCB has expired, insurers often offer introductory discounts to help new policies stay affordable, even for experienced drivers.
How much can a no claims bonus save you?
A No Claims Bonus (NCB) can save you up to 60% or more on your car insurance premium, depending on the number of claim-free years you’ve accumulated. The longer you go without making a claim, the higher your potential savings.
Here’s an idea of how much a typical NCB can save you:
- 1 Year NCB: 10-15% discount
- 3 Years NCB: 30-40% discount
- 5+ Years NCB: 50-60% discount or higher
For experienced drivers with an NCB of five or more years, the savings can significantly reduce premium costs. For example, a driver paying £500 annually for insurance could pay just £200-250 after applying their maximum NCB discount.
However, savings vary depending on the insurer, policy type, and other factors like your age and vehicle. Some insurers are more generous, offering discounts of up to 70% for drivers with eight or more claim-free years.
Key factors influencing savings:
- Insurer Policies: Discounts differ across providers, so it’s crucial to shop around to maximise savings.
- Claims History: While a claim resets your NCB, it’s worth noting that some claims (like non-fault incidents) don’t impact your discount.
- No Claims Protection: Paying for NCB protection ensures your savings are not wiped out after a single claim.
The savings offered by an NCB make it one of the most valuable incentives for safe driving. If you drive carefully, you can enjoy long-term financial benefits and significant premium reductions.
What are the common myths about no claims bonuses?
There are several myths surrounding No Claims Bonuses (NCBs) that can mislead drivers. Understanding the truth behind these misconceptions is essential to make informed decisions about your car insurance.
Many myths arise from misunderstandings or differences in policies across insurers. Because NCB rules aren’t standardised, it’s crucial to read the terms and conditions of your insurance policy carefully.
Here are the most common myths about NCBs and the facts to debunk them:
| Myth | Fact |
|---|---|
| A No Claims Bonus completely stops your premium from increasing | An NCB reduces your premium, but other factors like age, location, and vehicle type still influence costs. |
| You lose your entire NCB after any claim | Not all claims affect your NCB. Non-fault claims or those where costs are recovered often leave your NCB intact. |
| You can only earn an NCB on comprehensive policies | NCBs can be earned on both third-party and comprehensive policies, though comprehensive often offers better benefits. |
| You can use the same NCB on multiple policies | An NCB can only be applied to one policy at a time. If you insure multiple vehicles, each requires its own NCB. |
| Named drivers automatically build their own NCB | Named drivers usually don’t earn their own NCB, but some insurers allow driving experience to transfer under specific terms. |
Why should you compare no claims bonus policies?
Comparing No Claims Bonus (NCB) policies is essential to ensure you get the maximum benefit and flexibility from your car insurance. Different insurers have varying rules, discount structures, and terms, so understanding your options can save you both money and hassle.
While most insurers offer NCBs, the way they calculate, apply, and protect them differs significantly. Here’s why comparing policies is so important:
- Variation in Discounts: Some insurers offer up to 60% off after five claim-free years, while others may go as high as 70%. Checking multiple providers ensures you find the best possible savings.
- Protection Options: Not all insurers offer NCB protection, and those that do might charge different rates. This optional add-on is crucial for safeguarding your discount in case of a claim.
- NCB Transfer Rules: If you’re switching insurers, some providers make it easy to transfer your existing NCB, while others require detailed proof, which could complicate the process.
- Policy Conditions: Some policies allow NCBs to be earned on third-party cover, while others restrict discounts to comprehensive insurance.
Key questions to ask when comparing:
- How much discount does the insurer offer for each year of NCB?
- What’s the maximum NCB percentage they provide?
- Does the insurer allow NCB protection, and at what cost?
- How long will they honour your NCB if you take a break from driving?
Comparing policies doesn’t just help you save money—it ensures you have the right cover and flexibility for your needs.
Final thoughts
A No Claims Bonus (NCB) is more than just a discount—it’s a reward for careful and responsible driving. By building your NCB over time, you can enjoy substantial savings on your car insurance premiums while demonstrating your reliability as a driver.
Whether you’re a new driver starting your journey or an experienced driver with years of claim-free history, understanding how NCBs work is key to maximising their benefits. From protecting your bonus to comparing policies for the best savings, small steps can make a significant difference in the long run.
Key takeaways:
- Drive claim-free to build your NCB and reduce premiums.
- Protect your NCB to safeguard it against unexpected claims.
- Compare policies to ensure you’re getting the best value.
- Understand how insurers handle named drivers and claims to avoid surprises.
By leveraging your NCB wisely, you can make car insurance more affordable while staying protected on the road.
Frequently Asked Questions (FAQs)
Some insurers allow you to transfer a no claims discount from a motorbike to a car policy, but this isn’t guaranteed. Always check with your insurer, as rules vary significantly. Proof of claim-free years may be required.
You can request proof from your previous insurer, usually in the form of a renewal notice or a confirmation letter. Most insurers provide this upon cancellation or after your policy ends.
Yes, protecting your no claims bonus is often worth it if you’ve built up several years of discounts. It ensures your bonus isn’t lost after an at-fault claim, although your base premium may still increase.
Most insurers allow you to protect your NCB after you’ve built up at least two or three claim-free years. The exact timeframe depends on your insurer’s policy.
If you don’t have no claims bonus protection, your NCB will typically be reduced or reset after a claim. The reduction varies depending on your insurer and the number of years accumulated.
You can transfer your no claims bonus to your new insurer as long as you provide proof, such as a renewal notice or confirmation from your previous insurer. Your bonus stays intact during the switch.
No, you can only apply your no claims bonus to one policy at a time. If you insure a second car, you’ll need to start earning a separate NCB for that policy. Some insurers may offer a multi-car discount as an alternative.
No, your NCB is tied to you, not your vehicle. When you change cars, your no claims discount will transfer to the new policy as long as you remain insured.
Typically, named drivers don’t earn their own no claims bonus. However, some insurers allow named drivers to transfer their driving experience to their own policy, depending on the terms.
Discounts vary by insurer, but generally, drivers can save between 10% and 60% on their premium, depending on the number of claim-free years they’ve accumulated.