No Claims Bonus
Motorists who have been with a car insurance company for a period of time without making a claim may be entitled to receive a car insurance no claims bonus.
Typically, the level of the discount rises according to the amount of time that the driver has managed to stay on the road without registering a car insurance payout.
So a driver who has been on the road for one year may be entitled to a discount of around 15 per cent on their car insurancerenewal quote, while a road user who has steered clear of accidents for six years may be entitled to 60 per cent off their next quote.
Clearly then, the potential savings offered by a no-claims bonus can amount to hundreds of pounds per year.
Indeed the size of the incentive may encourage some motorists to think twice about registering a small claim for vehicle damage.
For example, if their vehicle is shunted while parked and has only sustained superficial damage - such as a dented bumper or scratched body paint - then it may work out cheaper to pay the car repair costs privately instead of contacting the
motor insurance company.
This is because the motorist might lose some or all of their car insurance no-claims bonus, which is typically set back by two years in the event of a claim being made.
To put this into figures, a motorist with a six-year no-claims history would effectively be treated as having a four year no claims past in this situation.
Of course, motorists involved in serious crashes requiring thousands of pounds of car repair work may decide that they are better off claiming the car insurance payout and losing their car insurance no-claims history.
Many insurers offer a facility whereby policyholders can protect their No Claims Discount (NCD) in exchange for paying a slightly higher premium if they have not made more than two claims in a three year period. An alternative is not to pay an increase in premium but to have a reduced discount rate. However, it is important to remember it is the discount that is protected, not the cost of the policy - insurers will still need to take into account a motorist's driving history when calculating their premium.
But remember, the money saved by protecting a car insurance no claims bonus (NCB) may not always outweigh car repair costs - it is a judgement call that can only be made by the motorist when the situation arises.
More information
Looking to compare car insurance quotes with Protected No Claims Discount added? Our guide will explain how.