Have you recently noticed that your car insurance renewal offer is cheaper than what you are currently paying? This could be due to an increase in your No Claims Bonus.
The longer you drive without making an insurance claim, the bigger this bonus becomes and the greater the discount on your insurance premium will be. So how does that work?
In this article, we breakdown what a No Claims Bonus (NCB) is and why it is important, how insurers calculate this bonus, how you can carry over this bonus when you change insurance provider and what happens to your NCB when you have an accident and have to make a claim.
Let’s start with the basics before moving on to some troubleshooting questions you may have…
What you need to know
What exactly is a No Claims Bonus (NCB) then?
Sometimes referred to as a No Claims Discount, this is a discount that is applied to the cost of your car insurance – a ‘reward for good driving’. Essentially, the longer you go without making a repair claim on your insurance policy, the bigger your No Claims Bonus gets, and the more money gets knocked off your annual insurance policy renewal each year.
The idea behind this is to consistently incentivise careful driving, and to deter drivers from making more erratic driving manoeuvres to keep their insurance costs low.
How is it calculated?
It’s pretty simple – your No Claims Bonus is expressed in years, calculating the number of years since you last made a claim on your car insurance. So, if you passed your driving test two years ago, and you have been driving since then without making a car insurance claim, you will have two years of NCB.
What is No Claims Bonus insurance and do I need it?
Now things start to get a bit confusing. When you take out a new insurance policy for your car, your insurer may offer further insurance for protecting your NCB. This protects your accrued NCB in the case that you need to make a claim.
Different insurers have different rules – usually these NCB protection policies are offered to those drivers that have accrued five years of NCB or more, and there will be a maximum number of claims you can make.
So, is it worth it? Well, that depends on you, and how likely it is that you will need to make a claim in the future. Please note that this protection insurance will not prevent your car insurance premiums from increasing over time. Insurers will usually take account of your claims history when calculating the cost of your insurance, and the longer the history, the less favourable it is for you.
I have had an accident and I need to claim on my insurance – what happens to my No Claims Bonus?
If you make a claim under your car insurance policy after the accident, while trying to cover the cost of anything from a small fender-bender to a write-off, you will usually lose some, or all, of your NCB. Essentially, this means that your insurance will be more expensive when you come to renew your policy. However, if the accident was deemed by the insurance company to not be your fault, your NCB is unlikely to be affected.
Will my No Claims Bonus eventually max out?
Yes, each insurance policy has a maximum number of years you can accrue for your NCB, or a maximum percentage for the corresponding discount, but this depends on your policy provider. To check how many No Claims Bonus years your current insurer will honour, you can use this handy NCB tool on the Money Supermarket website.
On average, insurers will set a maximum of five years of NCB, which usually means a maximum discount of around 70%. That said, these terms vary depending on your insurer – Churchill will honour a maximum of four years of NCB with a maximum discount of 80%. while the RAC will honour nine years of NCB, with a maximum discount of 65%.
Some insurers continue to count your NCB years beyond the maximum they set, without increasing the NCB discount. While this seems rather pointless, it is a good thing! Should you get into an accident and need to claim, and you have a few years of claim-free driving beyond your discount limit, you may only lose a few years of NCB without affecting your discount.
I am changing my car insurance provider – does my No Claims Bonus automatically carry over to my new policy?
No – not automatically. You can usually transfer your accrued NCB between insurers, but you will need to provide proof of your NCB to your new insurance provider. This usually means providing a copy of your current policy that shows your current bonus level, or requesting a certificate from your current insurer to confirm it.
Some troubleshooting
How can I find out how many years of no claims bonus I have?
Any letters or emails from your insurer regarding your policy could carry some details about your accrued NCB. The majority of insurers also allow you to log in as a customer on their website to view your policy details. If you don’t have a login or password for this, you can directly contact your policy provider who can give you an up-to-date NCB figure.
My insurance provider offers an Accelerated Bonus Scheme – what’s that?
If you are a young driver or someone who has had their NCB drained by a recent claim, some insurers offer customers with no NCB an ‘Accelerated Bonus Scheme’, which usually awards a year’s NCD after ten months claims-free driving. This means that you can get a discount on your insurance quicker if you are just starting to build your NCB.
I am a named driver on our car insurance policy – I accrue a No Claims Bonus too right?
If you are named as a driver on the car insurance policy, but you are not the policyholder, it is unlikely that you will be able to build up your own NCB. That said, some insurance policies include named driver NCB, but if you’re thinking of switching your insurance at renewal time, check that your new insurer honours your named driver NCB – some do not.
How do I make sure minor claims don’t affect my No Claims Bonus?
If you have a comprehensive car insurance policy, minor claims on things like windscreen cover or car keys cover are unlikely to impact your accrued NCB. It is best to contact your insurance company first to double check.
I have a few years of No Claims Bonus from living overseas – can I transfer this to a UK insurance policy?
Whether you can transfer NCB accrued overseas to a new UK insurance policy really depends on the policy provider. Each insurer has its own list of countries they will accept NCB from, and if your NCB comes from a country not on this list, then unfortunately you’re out of luck.
How does a No Claims Bonus work on multi-car policies?
Multi-car policies usually have multiple policyholders, and each of these policyholders will accrue their own NCB independently. Therefore if policyholder A makes a claim which affects their NCB, this will not impact the NCB of policyholder B who did not make a claim.
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This article was originally published in August 2022 and was most recently updated in June 2023.
