No claims discount explained

A no claims discount (NCD), also known as a no claims bonus, can go a long way towards cutting the cost of your car insurance. Here’s how it works.

A no claims discount (NCD), also known as a no claims bonus, can go a long way towards cutting the cost of your car insurance. Here’s how it works.

Kate Hughes
Car insurance expert
5
minute read
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Posted 29 NOVEMBER 2021

What is a no claims discount?

Every year you drive without claiming on your car insurance gives you an extra year of no claims discount. This could reduce the cost of your insurance when you come to renew. The longer you drive without claiming, the bigger the discount on your premium could be. 

And those discounts can be significant. You might find, for example, that your insurance provider could offer a discount of 30% on your premiums if you can prove you’ve been claim free for a year. But that could rise to a maximum worth as much as 65% or even 70% if you’ve been claim free for five or more years.

How long can I keep accruing a bonus?

That’s at your insurance provider’s discretion. Some won’t offer more discounts beyond five years, but others allow more.

How is my no claims discount affected if I make a claim?

If you make one claim on your insurance and your insurance provider pays out, your no claims discount is typically reduced by two or three years. It could be further reduced if you make two or more claims. 

So, if you have eight years of NCD and make a claim, in theory you’ll be left with five or six years’ NCD. But this isn’t always the case. If your insurance provider considers the industry standard of five years to be the maximum NCD, you’ll be left with three years’ NCD. And if you make a second claim, you’ll lose it all. Most insurance providers will explain what happens to no claims discount in their policy booklet, so you can check before you buy. 

Policy documents will also explain which claims will and won’t impact your no claims discount. For example, if the accident wasn’t your fault, your insurance provider will try to recover the costs from the driver who was at fault. In which case, your NCD should be unaffected.

If no one was to blame for the accident, insurance providers may split the cost of the claims and both drivers’ NCD could be affected. 

If your car is stolen, vandalised or damaged and they can’t catch the culprit, your insurance provider won’t be able to recoup its costs. That means your NCD will likely be affected, even though the damage may have had nothing to do with you.

Can I protect my no claims bonus?

It depends. Some insurance providers won’t allow you to protect your NCD if you’ve earned less than four years’ discount. But if you have the right number of years, you can protect it by paying a fee on top of the cost of your car insurance – these can vary a lot, so it’s worth shopping around. Pay the extra, and if you do claim on your insurance, your NCD stays intact. 

Some insurance providers allow you to make two claims in a year without it affecting your discount. But other insurance providers may significantly cut your NCD if you claim twice. 

It’s worth bearing in mind that if you do claim, protecting your NCD may not actually stop your premium rising, as insurance providers consider your claims history when working out the cost of your premium. So your premium is likely to go up, but the level of discount your receive remains the same. 

In other words, it’s worth doing a bit of number crunching to work out if your NCD is worth protecting, given your driving history and other circumstances. 

Yes, you’d undoubtedly spend more money on your premiums, but would you lose more if you had to make a claim, some or all of your NCD was forfeited and your premiums went up as a result? The answer might surprise you.

Can named drivers build up a no claims discount?

Named drivers can’t usually build up a no claims discount, although they can accumulate their own if they’re insured as the main driver on their own car. Some insurance providers may give a named driver a discount – provided they take out their own policy at a later date.

Can I transfer the no claims discount I earned driving a company car?

That depends. If you had sole use of your company car, some insurance providers will take into account your claim-free years and offer an equivalent discount. Your company car insurance provider should be able to confirm that you had sole use of the car for social, domestic and pleasure purposes, as well as for business use, along with how many years of claim-free driving you have.

Can I transfer a no claims discount I earned abroad?

If you’ve built up a no claims bonus overseas, you may be able to transfer it when you return to the UK. This is down to the insurance provider’s discretion and not all treat overseas NCDs in the same way, so check with them before assuming anything.

Can I keep my no claims bonus if I switch insurance providers?

Yes, you can usually take your no claims bonus with you if you switch providers. To do so, you’ll need proof of your existing NCD, usually in writing. Your new provider is likely to ask you to provide proof within a set number of days from request or purchase. If you don’t provide proof your policy could be cancelled, and you could be charged an admin fee or asked for an additional premium.

How can I get proof of my no claims discount? 

Some insurance providers will include details of your no claims discount on your insurance renewal or cancellation notice. Others will send a letter with the details. Some insurance providers may not tell you at all and you’ll have to contact them.

Does my no claims discount expire? 

If you’re uninsured for more than two years, you’ll probably have to sacrifice your no claims discount and start again from scratch. But some insurance providers have extended the gap to three years, so it’s worth checking.

How do I get a quote?

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