The worth of your no-claims bonus and whether you should safeguard your no-claims discount is a question worth investigating.
Car Insurance Premiums: Understanding No Claims Bonus and Its Implications
Car insurance costs remain above pre-pandemic levels, with the average policy costing £757 a year in the second quarter of 2025. One factor that significantly influences these premiums is the No Claims Bonus (NCB).
What is No Claims Bonus (NCB)?
A No Claims Bonus is a type of discount that reduces the cost of insurance when renewed, based on a history of not making any insurance claims. The value of this bonus typically increases with the number of consecutive years without a claim.
Protecting Your No Claims Bonus
Protecting your NCB usually adds an extra cost to your premium, as it means the insurer takes on more risk by guaranteeing your NCB won't be reduced after a claim. However, this protection can save you money in the long run. If you make a claim, your future premiums will not increase as sharply as they would without protection, since your NCB remains intact and you keep the discount you have earned for claim-free years.
Eligibility and Limitations
Some insurers require a minimum number of claim-free years and restrictions on recent claims before you can buy NCB protection. The number of claims that can be made without affecting the bonus depends on the terms of the insurance policy.
Impact on Premiums
A NCB can reduce premiums by 20-60% depending on how many consecutive claim-free years you have. Losing this discount after a claim could increase your premium by 10-25% or more.
Renewing Your Policy
The date of renewing your car insurance policy can affect the cost, with some days being cheaper than others. It's always best to double check the insurance documents before renewing, or contact the insurer to understand the terms and conditions.
Maintaining Your No Claims Bonus
Regardless of whether a claim is made or not, it is necessary to inform the insurer about any incident. Failing to do so could invalidate the insurance and result in rejected claims later on. Making an insurance claim can set back a no claims bonus by several years, potentially taking it back to zero. However, some insurers do not invalidate the bonus for certain circumstances such as accidents not at fault.
Tips to Cut Car Insurance Premiums
To cut car insurance premiums, consider using a black box, paying upfront, and avoiding invalidation of insurance. The value of a no claims bonus typically increases with the number of consecutive years without a claim, so maintaining a good driving record is crucial.
Insurers often have slightly different rules for how their no claims bonus works, so it's always important to read the policy documents carefully or contact the insurer to understand the terms and conditions. The average value of a no claims bonus when purchasing a new policy can vary, with less being offered for no claims compared to more consecutive years without a claim.
In summary, protecting your no claims bonus means paying slightly more initially but shielding yourself from large premium hikes after claims by preserving your earned discount. This trade-off can be cost-effective for drivers with significant no claims history who want to avoid big insurance premium increases after an accident or claim.
Maintaining a good driving record is crucial for drivers who aim to better their personal-finance by increasing their No Claims Bonus, as the value of this bonus typically increases with the number of consecutive years without a claim. Conversely, making an insurance claim can set back a no claims bonus by several years, potentially taking it back to zero and impacting the cost of future personal-finance investments such as car insurance premiums.
