What is a no claims bonus?
Your no claims bonus is your best friend when it comes to insurance and it plays a huge part in reducing your premiums every year! Most companies tend to offer lower rates based on the number of years you have gone without claiming. This is also something that really contributes towards the discounts you can get at renewal!
How does the no claims bonus work?
Regardless of whether it's pet, house, or car - most types of insurance allows you to accumulate a year's NCB (No Claims Bonus) for every year you are insured and don't make a claim - pretty self-explanatory I guess. So, providing you or your car haven't been involved in any accidents or incidents in that time, OR where your previous insurers have had to pay out, this should help you gain a discount on your next year's insurance. Your first year's NCB could give you around 30% on your policy at renewal, each year no claims you gain you may gain further reductions of approximately 10-15%. The more years you go without making a claim, the cheaper your insurance should become!
How would making a claim affect my car insurance?
It is known that every insurer operates differently when it comes to making a claim. Most companies take into account up to 5 years+ NCB, so this means after a few years without a claim you could see yourself with a 60-75% discount on your original premium! So what happens when you do actually need to make a claim?
Well... again it can vary from insurer, but a MoneySupermarket survey found that some companies will slash your No Claims Bonus by 2 years if you make a claim, and others will reduce that even more if you do not have a minimum of 5 years under your belt. But it is all usually at their own discretion. It seems a bit harsh doesn't it? But the underlying fact is... a claim is a claim, and the insurer still has to make a pay-out, unless the other party's insurance company is able to settle the costs their end.
Is it worth protecting my no claims bonus?
Many people are sceptical about whether it's even worth protecting your no claims but equally some people find the ability to protect their discount, re-assuring.
It's important to remember that in black & white, your extra pennies are protecting the no claims discount and not any potential increases in overall price. At renewal, insurers have to account for other risks, whether that's due to a higher number of claims in general, your area has become more prone to theft or simply because you've traded your old wheels in for something with a bit more to grunt. If the risk is increased, your premium will be too. Likewise, by protecting your discount it should still mean you would pay less than you would have done if you had not protected it.