A simples guide

Do no claims discounts work the same for all insurers?

There’s nothing like that smug feeling of amassing several years’ worth of no claims discount. But you might wonder if your years might not be worth as much with another provider. So what are the facts and is there ‘an industry standard’ when it comes to a no claims discount?

What is a no claims discount?

A no claims discount is what you earn every year you drive without claiming on your insurance. Each year you drive without claiming gives you a percentage off your next year's premium so the more claim free years you have, the greater the discount on your policy.

A no claims discount (NCD) is sometimes known as a no claims bonus and you can only earn it by having an insurance policy for a full year. So if you’ve switched policies before the year is up, you won’t earn any NCD for that year.

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Is there a no claims discount industry standard?

Confusingly there are lots of differences in no claims discounts and there is no standard model. There may be industry norms but insurers are free to have their own rules and criteria about how much discount to give and what the maximum number of no claims years you can have are. This is why we’d always recommend you compare the market so you can really see what’s on offer, giving you an opportunity to make the best choice. Here are the key points and the differences you can expect:

Who can have a no claims discount? In most cases only the main driver or policyholder can earn the no claims discount. However, if a named driver is on a policy with a good no claims history, some insurers will give them a discount if they take out their own insurance policy with them at a later date.

Can I transfer my NCD to my spouse? You can usually transfer a no claims discount between spouses and partners (someone who is living at the same address as you and who you’re in a relationship with). But the expectation will be that your spouse or partner will have held a driving licence for the length of time it would have taken to accrue that level of discount.

What if I have a gap in my insurance history? In most cases, if the gap is two or more years, then you’ll have sacrificed your no claims discount and you’ll have to start accumulating it from scratch. However, some insurers have extended that gap to three years so if your lapse is borderline, mention it.

What if I have been driving a company car? You don’t earn NCD while you are driving a company car but if you had social, domestic and pleasure use of your company car some insurers will take your number of claim free years in to account and offer an equivalent discount. Your company car insurer should be able to provide a letter to confirm that you had use of the car and how many years claim free driving you have.

Transferring my NCD from abroad – If you’ve been abroad and you’ve gained a no claims discount from your policy outside of the UK, you may be able to transfer that NCD when you come back home. Again, this will be down to the discretion of the individual insurer but it’s always worth asking if you can do this.

How do I get proof of my NCD? Some insurers will include the number of no claims years on your renewal or cancellation notice or will send you a separate letter telling you what it is. Some providers may not tell you at all and you’ll have to ask for it yourself.

What’s the maximum number of years I can accrue in no claims? The norm is five years but some insurers will allow nine or even 15 years. On our site, you can specify 25+ years!

How much could I save with my no claims discount? Insurers will have their own discount structures.

If I claim, how is my NCD affected? If you make an at fault claim, then typically insurers will deduct two years from your total number of no claims years. So if you have accrued five years of NCD and you make a claim, you’ll lose two – leaving you with three years at your next renewal.

However, you’ll need to really scrutinise the small print with this one. As some insurers cap the maximum at five years, anything beyond this becomes irrelevant. So if you had eight years of NCD and claimed, in theory you’d be left with six years NCD, right? Not if your insurer considers the industry standard of five years, if this is the case then in their eyes 5−2=3 and so three years of NCD is all you’ll be left with.

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And the moral of the story is…

…to always compare the market because that’s the only way you’ll be able to see who’s got what on offer – easy peasy.

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