How does the no claims bonus system work?

Your no claims discount can drastically reduce the cost of your car insurance, but drivers are often confused about how it works, especially if you're a new driver, if you've been a named driver on another policy, or you're switching insurers.

 We’ll try to answer your questions here, but please get in touch if you would like more information.

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What is a No Claims Discount?

A no claims discount (also called a no claims bonus), is a discount that's applied to your car insurance premium to recognise that you've been claim-free for the last 12 months. It’s calculated and applied each year when you renew your policy, or at the start of a new policy. Careful drivers are a lower risk to the insurance company, so the discount makes their annual premium much more affordable.

How much discount will you get?

All insurance companies have their own no claims discount scale, but a typical example might be:

  • 30% discount after 1 year’s claim-free insurance
  • 40% discount after 2 years
  • 50% discount after 3 years
  • 60% discount after 4 years
  • 65% discount for 5 years or more claim-free insurance.

I don't have a no claims bonus - how can I get cheaper car insurance?

You can still take steps to reduce the cost of your insurance, even without a no claims discount. 

  • Choose a car in a low insurance group
  • Volunteer to pay a higher excess
  • Add a more experienced, named driver to your policy
  • Fit an approved immobiliser or alarm
  • Keep your mileage as low as possible
  • Don't do any car mods
  • Keep your licence free of convictions 
  • Take the Pass Plus driving course

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You’ve been a named driver on your parents’ policy until now. Can you get a no claims discount?

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If you've been a named driver on someone else's policy for a while, you probably don't have a no claims discount in your own name. Fortunately, some insurers offer an introductory discount for named drivers.  However, the discount may be lower than the discount given to drivers who already have a policy in their own name. There may also be restrictions on the minimum age for giving an introductory no claims discount. 

Get the maximum benefit from your good driving, by getting insurance in your own name as soon as possible.  You can make significant savings after just one year if you’ve had no claims.

No claims bonus for second drivers

A no claims bonus is usually only given to the policyholder themselves, so second drivers, also called "named drivers", don't usually earn their own bonus unless they are also the main driver on another policy. Here's a couple of examples.

  1. A husband and wife each have their own car and insurance, but are also named drivers on each other's car insurance. They can only earn a no claims bonus from their own policy.
  2. A husband and wife share one car. The insurance is taken out in the husband's name, as he uses the car most often, but his wife is also a named driver. The no claims bonus will be earned by the husband; his wife will have none. 

The exception to this is that some insurers run special schemes that permit named drivers to earn their own discount. They can use this at a later date if they take out their own policy, but this is usually only the case if you stay with the same insurer.

I’ve just changed my car – will I have to start earning a no claims discount from scratch again?

No. Your no claims discount is earned by you, the policyholder. It doesn’t affect your discount if you change the car that’s insured on your policy.

Blue car

I’ve bought a second car – can I apply my no claims bonus to both cars?

Unfortunately not. Even though a no claim bonus is earned by the policyholder, you can only apply it to one car at a time. Most times, you’ll have to start earning a new NCB on each additional vehicle you insure, but some insurers may allow you an “introductory” or “second car” discount if you mention it to them.

What happens to my no claim bonus when I change my insurance company?

This isn’t usually a problem. You simply need to ask your old insurance company to supply you (or your new insurer) with proof of your no claims discount (e.g. 3 years, or 4 years). The annual renewal letter from your old insurer may serve as proof of your no claim discount, or you may have to ask them to send specific proof in a separate letter.

There is usually a time limit for you to provide your new insurance company with proof of your no claim bonus (for example 7, 14 or 21 days). If you fail to do so within the time limit, your new policy could be cancelled. This would leave you uninsured, which is illegal. If the insurer doesn't cancel the policy, they'll probably charge you the pre-discount premium in full.

Providing proof of your no claims discount is usually quite simple, however; once it is received, your insurance company will apply the correct discount to your premium.

Will I lose my no claim bonus if I make a claim?

It depends. If your insurance company can recoup any expenses from paying out on a claim, then you won't lose your no claims bonus. This often comes down to who, if anyone, was at fault if oyu're involved in an accident. 

For example, if another driver crashes into you and it’s undeniably their fault, your insurance company may be able to recover the cost of repairing your car from the other driver’s insurance company.

If that happens, you won’t lose any of your no claim bonus.

But if you make a claim where you are at fault, or your insurance company can’t recover their losses because no one else was involved, or the responsible third party can't be traced, your no claim bonus will be affected.

Your discount usually “steps back” by two years for each claim. So, for example, a three year bonus would reduce to one at your next renewal. If you made another “at-fault” claim, the resulting step-back would result in you losing your no claim bonus altogether.

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Protecting your no claim bonus

Once you’ve built up a few years' no claim bonus, you can “protect” it with an optional extra fee. This means your no claim bonus will be safe-guarded, even if you make an at-fault claim.

How long before you can protect your no claims bonus?

Each insurer will have their own rules. It's common for many insurers to require five years claim-free driving before you can protect your bonus, but others may ask for just three. Check with your own insurance company.

Insurers vary in their rules for protected no claims bonuses. For example, some will allow you two claims in five years, but others have lower limits, for example  two claims in three years. Check the rules with your own insurer.

Remember that a protected no claims discount won't guarantee that your annual premium won't increase, only that the discount on your annual premium is protected.

Here's an example of how your protected no claims discount works with an increase in the annual premium:

Your insurance costs £1,000 in the first year but is reduced to £400 after applying a 60% protected no claims discount. You make an at fault claim that year. The following year, your annual premium may rise to £1,100 owing to normal cost rises, but your 60% discount is protected following your claim, and so your premium for that year is £440.

Normally, the discount would drop back two steps (e.g. to 40%) after a claim, which means that your premium in the second year would have been £660 without the protected NCB.

Is it worth paying to protect your no claims bonus?

The payment for protecting your no claim bonus is usually less than the discount you’d lose if your no claims discount stepped-back by two years. This makes it worth having, but do your own calculations to be sure. If you have a run of several years without making a claim, but pay for protected no claims bonus, the saving diminishes a little, but the sums are still likely to add up in favour of having it.

How long does a no claims discount last?

Your proof of NCB will usually only be valid for two years, although this will depend on the insurer. So if you are planning on taking a break from driving for more than two years, you might have to start from scratch with your next car insurance.

How do I get proof of no claims bonus?

When switching to a new car insurance company, your new provider will often request proof of your existing no claims discount. You need to get this from your previous insurer.

Each company handles the process in a different way. They may include it in your policy renewal or cancellation letter, or you may need to specifically request one. The document itself could take the form of a printed letter, certificate or an email attachment.

There may be a time limit on sending proof to your new insurer which could be anywhere from 7 to 21 days. If you don’t provide it in time your policy could be cancelled, or you might be asked to pay the full premium without any discount.

Can you transfer a no claims discount from bike to car?

Many insurers will happily accept your bike or moped discount as long as it isn’t being used on an active policy. Transferring is especially important for young drivers who started on two-wheels but have changed to a car and want their experience acknowledged.

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