How Does a No-Claims Bonus Work?

It can cut the cost of car insurance.

A no-claims bonus in car insurance is a discount on your future premiums in exchange for not making a claim. But how does a no-claims bonus work? Can you take it with you to a new insurer? And do you lose it if someone hits your car?  

We’ve got the answers to all of those questions – and more – below. 

What is a no-claims discount?

A “no-claims bonus” (NCB) or “no-claims discount” (NCD) is a discount on your future car insurance payments for each year that you haven’t claimed on your car insurance policy. 

If, for example, you pay £800 a year for car insurance, and your NCB is 20%, your next annual bill will be reduced by 20% to £640 — simply by not making a claim in the previous policy year.

Think of it as a reward from your insurer for careful driving and responsible car ownership.

So, how does it work? How is a no-claims bonus calculated? 

A no-claims discount is pretty straightforward. For every year that passes without making a claim on your car insurance, your discount increases. 

Depending on the insurer, this might mean that after your first-year no-claims, you’ll get a 20% discount when you renew your policy. And if you continue the trend of not making a claim, your discount could increase to 30% the following year, 40% the year after, and so on. 

How many years does it take to get a full no-claims bonus?

The longer you drive without making a claim, the more discount you can accumulate. However, you can’t accrue a 100% NCB. Most insurers will cap their no-claims bonus at the five-year mark, which usually translates to a 70% discount.

How do I know if I have a no-claims bonus?

There are a few ways to find out if you currently have a no-claims discount: 

  • Check your car insurance policy documents. This should highlight whether you have a no-claims bonus and what sort of discount you’re entitled to.
  • Check your renewal letter. If your policy is up for renewal, your insurer will outline your discount in the renewal letter.
  • Check your cancellation letter. If you switch car insurance providers, your cancellation letter should mention any accrued no-claims bonus.
  • Call and ask. Alternatively, you should be able to call your current car insurance provider and ask how much no-claims discount you’ve built up over the years.

What if I’m a named driver? Can I still get a no-claims discount?

Generally speaking, a no-claims bonus can only be accrued by the main driver. If you’re a named driver on a car insurance policy (meaning you’ve been added to someone else’s car insurance policy), you probably won’t benefit from an NCB. 

That said, some insurers allow named drivers to build up a no-claims discount. However, this is usually only available if you stay with that insurer when you take out your own car insurance policy in the future.

Can I transfer my no-claims bonus to a new policy or provider?

Yes, it’s possible to transfer your no-claims bonus when you switch insurers or buy a new car.

It’s important to note that your no-claims discount can only be used on one vehicle at a time. And depending on the insurer, you may be able to transfer an NCB from a motorbike or van to a car. However, not all insurance providers will accept a no-claims history for a different type of vehicle.

If you’re planning on switching providers and taking your NCB with you, you may be asked to provide proof.

How do I get proof of my no-claims bonus?

If you need to prove your no-claims status to a new insurance provider, check your cancellation letter from your previous insurer. This should include details of your NCB. 

Alternatively, you should contact your old insurer and ask them to send you the details you need.

Can I transfer my no-claims bonus to another person?

While some insurance providers will let you transfer your no-claims discount to a spouse or partner, it’s not all that common. 

This is because the discount is typically offered as a reward for careful driving. Most insurers would be reluctant to hand that discount to another driver whose claims history isn’t as spotless as yours.

Is it worth keeping a no-claims bonus?

Yes! If you can accumulate five or more years of no-claims, the discount can knock a considerable amount off your yearly car insurance bill. 

The downside is that it can all disappear in a flash, even if you’re not at fault (more on that below). That’s why many drivers choose to protect their no-claims bonus for an additional fee.  

Should I pay to protect my no-claims bonus?

It depends on the numbers. If you have a sizeable no-claims discount, paying to protect it makes sense. 

For example, if your NCB is 50% and your yearly car insurance bill before the discount is £800, keeping your bonus intact would be worth £400. Paying an extra £50 for no-claims bonus protection would still mean you’re saving money in the long run. 

However, you need to remember that NCB protection protects the discount. It doesn’t freeze your premium. If you need to make a claim, your premiums could still go up. And depending on the price rise, paying to protect your no-claims may no longer be worth it.

Do you lose no claims if someone hits your car?

If someone hits your car and you need to make a claim on your policy to repair the damage, you’ll usually lose some or all of your no-claims bonus if your insurer has to pay out. This can happen even if you’re not the one at fault.

How much NCB you lose will depend on your insurer and how many years you’ve accrued.

That said, there are certain situations where you won’t lose your NCB if someone hits your car. If the other driver agrees that the accident was entirely their fault, your insurance provider could potentially recover 100% of the costs from their insurer, keeping your no-claims untouched.

Is my no-claims bonus at risk if I’m supervising a learner driver in my car?

It could be. It depends on the finer details of your insurance policy. If your policy covers the supervision of learner drivers in your vehicle, you’ll need to check the terms and conditions and how any incidents while they’re driving might impact your NCB. 

To be on the safe side, it’s often a good idea to take out a separate learner driver insurance policy. This will protect your no-claims bonus while your learner gets to grips with life behind the wheel.

Can I make a claim without affecting my no-claims discount?

Yes, there are certain circumstances where you can make a claim and not lose your no-claims discount.

For example, if you’re involved in an accident that wasn’t your fault, your insurance provider may be able to recover the repair costs from the other driver’s insurance. In that case, your no-claims discount won’t be affected.

And many insurers will also allow you to claim for breakdowns, windscreen damage, and motor legal expenses without impacting your no-claims bonus. However, you should always check the fine print of your policy and ask for clarification if you’re unsure. 

Quickfire summary: How does a no-claims discount work?

To recap, your no-claims bonus is a reward for careful driving and responsible car ownership. For every year that passes without making a claim, your discount increases, netting you a larger saving on your car insurance premiums.

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