When taking out a car insurance policy the term 'no-claims discount or no-claims bonus' is often mentioned a lot and you may even be asked how much bonus you have when filling out a car insurance quote. But what does no-claims discount mean and how does it affect your car insurance?
In this article, we explain how no-claims discounts work, how much money no-claims discount saves and whether no-claims discount protection is really worth it.
1 minute summary
- A no-claims bonus is built up over time for every year you don't make a claim on your car insurance policy and as a result, insurers may reward you with a discount on your policy premium.
- A no-claims bonus can only be earned by the main driver on the policy but it can sometimes be transferred between policyholders.
- The no-claims discount you can get varies depending on the insurer.
- No-claims discount for a driver with 5 years no-claims averages around 17% if you stay with the same insurer but could be up to 62% if you shop around.
- It is possible to protect your no-claims discount but it comes at an additional cost, typically between 5-10% of your car insurance policy premium.
- A quick and easy way to buy and compare car insurance is via a comparison site as you can compare multiple providers at once.
- We have partnered with Quotezone* so that you can search and compare quotes from over 110 UK car insurance providers.
What is a no-claims discount and how does it work?
If you hold a car insurance policy and do not make a claim, this is classed as a claim-free year. Car insurance providers reward customers for the number of claim-free years they build up over time, often referred to as a no-claims discount or a no-claims bonus. The exact discount that you will receive varies depending on the provider but according to the Association of British Insurers (ABI) this could be as much as 60% and some insurers may offer better discounts than others. It may also be possible to protect your no-claims discount, meaning you will get to keep your no-claims discount even if you go on to make a claim. You can read more about how much it costs to protect your no-claims discount later in the article.
How long does a no-claims discount last?
In most instances, no-claims bonuses expire after 2 years and so if you have had a break from insurance you may need to start from scratch and rebuild your individual bonus. It may be worth contacting your provider, however, as this can vary between insurers and some could honour your previous no-claims history.
How to build a no-claims discount
No-claims discount can be earned over time by main drivers on car insurance policies. If you are a named driver on a policy you will unfortunately not be able to build a no-claims bonus. If you have another policy in your name you will be able to earn your no-claims bonus on that instead. The good news, however, is that it is possible to maintain your no-claims discount for a period of time and use it towards a car insurance policy in the future as long as the time left between insured periods isn't too long, usually over 2 years, or you may risk losing the discount.
How to find your no-claims discount
You may be asked by your insurer to prove your no-claims discount, in this instance you will need to send proof that you have not made a claim. Details of this may be found in renewal or policy documents but if you are unable to locate this information you could ask your existing insurer to send you proof of your no-claims.
Can a no-claims discount be transferred?
It is possible to transfer your no-claims bonus between insurers but you may be asked to provide proof of your bonus. If you have had a break between insurance periods it may be possible to carry over your previous no-claims as long as the period without insurance has not been too long, usually over 2 years although it can vary between insurers.
If you have previously been insured on a company vehicle and wish to transfer over your no-claims it is worth asking your insurance provider if this is something that they accept. It is likely that you will have to contact the insurer that covered your policy on your company vehicle and ask them to provide proof of your no-claims. In most cases, you will have had to be the main driver on the company vehicle in order to have been accruing a no-claims bonus.
You may also be able to transfer your no-claims discount to another policyholder e.g. your spouse. For example, Direct Line says that the no-claims discount can be ‘swapped between the policyholder and their spouse/partner, provided that the spouse/partner has held their licence long enough to accrue that level of NCD and lives at the same address as the policyholder.'
How much can you save with a no-claims discount?
How much you can save with a no-claims bonus can vary depending on the number of no-claims bonus years you have and the insurance provider. According to the Association of British Insurers (ABI) your no-claims discount can be as much as 60% if you have 5 years of no-claims although this varies largely between providers.
It is also worth noting that some providers typically offer a maximum no-claims discount, which is usually around 9 years. After this point, you may not benefit from any additional discount despite the longer no-claim period. This also means that if you are with an insurer that has a maximum of 9 years no-claims discount, but you have 12 years of no-claims history, only 9 years of no-claims will show on your policy documents.
Typical no-claims discount with the same insurer
The following table from car insurance provider Direct Line highlights how much no-claims discount, on average, car insurance policyholders received with Direct Line in 2022. This is a stark contrast to the table below from confused.com which shows the average no-claims discount if you shop around with different insurers.
|No-claims bonus (years)||Average discount|
(Source: based on data from Direct Line in 2023)
The table above is a stark contrast to the table below from confused.com which shows the average no-claims discount if you shop around with different insurers.
Average no-claims discount if you shop around
In the following table, we share data from confused.com that highlights the average no-claims discount that you can receive if you shop around with different insurers. The discount is comparing the number of no-claims years to a policy with 0 no-claims discount and is based on data from confused.com between June 2022 – June 2023.
|No-claims bonus years||Average car insurance cost||% discount compared to 0 years no-claims bonus|
(Source: based on Confused.com data between June 2022 – June 2023)
How does age impact your no-claims discount?
The following tables show examples of how much a no-claims discount can save you on your car insurance policy. The quotes are based on the most comprehensive policy available for a 30 and 50-year-old individual that has had a licence for 12 years and lives in the South East while driving 10,000 miles a year both socially and when commuting to work. The vehicle driven is a 2018 Ford Fiesta and there is a £100 voluntary excess on the policy, the compulsory excess varies depending on insurers.
No-claims discount savings – 30-year-old
|No-claims discount||Admiral||Direct Line||LV=|
|% discount when comparing 9 years no-claims to 0 years no-claims||14%||24%||40%|
No-claims discount savings – 50-year-old
|% discount when comparing 9 years no-claims to 0 years no-claims||8%||19%||29%|
What happens to your no-claims discount when you make a claim?
Not claiming on your car insurance policy builds up your no-claims discount and so if you find you need to make a claim you may lose some or all of your no-claims discount. How much your no-claims discount will reduce by varies depending on your insurer.
An example of how your unprotected no-claims bonus is affected when you make a claim can be found in the below table. The figures are examples from LV='s car insurance policy.
|No-claims discount at policy start||What your no-claim discount is reduced to if you make 1 claim||What your no-claim discount is reduced to if you make 2 claims||What your no-claim discount is reduced to if you make 3 or more claims|
|0 – 2 years||0||0||0|
|3 years||1 year||0||0|
|4 years||2 years||0||0|
|5 – 8 years||3 years||1 year||0|
|9 years||4 years||2 years||0|
How to protect your no-claims discount
If you want to protect your no-claims discount, this can be done by purchasing no-claims protection. With some insurers, such as Direct Line, you have to have a minimum of 4 years' no-claims discount (plus no more than one fault claim within the last 3 years) in order to be eligible to purchase no-claims protection. Once purchased, subsequent claims will not affect your no-claims bonus. There is a limit, however, with those that make two claims or more within 3 years no longer being eligible for no-claims protection. Exactly how long you are protected for will vary between insurers so you need to ensure you check this before purchasing the no-claims protection.
How much does it cost to protect your no-claims discount?
Protecting your no-claims bonus will come at an additional cost – usually around 5-10% of your policy price – and this can vary depending on the insurer.
Is it worth protecting your no-claims bonus?
Whether it is worth protecting your no-claims bonus depends on several factors, including how much no-claims discount you have. Looking at the earlier tables in this article, you can see that you can make a fair saving, even if you have only built up a couple of years of no-claims bonus. If you manage to remain claim-free and build up several years of no-claims bonus, then the savings can be significant, so protecting your no-claims bonus is likely to be worth it. However as mentioned previously, some insurance providers will only allow you to protect your no-claims bonus once you have reached a certain number of years.
If you don't protect your no-claims bonus, and then have an accident, you risk losing some or all of your no-claims discount. Exactly how much you will lose will vary depending on the insurer and the circumstances of the claim. For example, if you have a non-fault claim you could still lose your no-claims bonus if your insurer is unable to reclaim the costs for the damage from the other party.
When working out whether it is worth protecting your no-claims you need to weigh up the costs. Does the no-claims discount at renewal warrant the additional cost of protecting your no-claims? You will also need to consider how your renewal premium will be affected if you make a claim and if your no-claims bonus will be reduced.
The following table shows the cost of an annual car insurance policy with LV= for a 40 year old with 4 years no-claims discount before and after an at-fault accident.
Example costs if you protect your no-claims discount
|Cost of policy before accident with 4 years protected no-claims discount||Cost of policy upon renewal after at-fault accident||Increase upon renewal|
Example costs if you do not protect your no-claims discount
|Cost of policy before accident with 4 years unprotected no-claims discount||Cost of policy upon renewal after at-fault accident||Increase upon renewal|
The cost to protect the no-claims discount in our example above was £110.60. However, following an at-fault claim, the renewal for the policy with protected no-claims was £237.47 cheaper, when compared to the policy that didn't include protected no-claims.
The above is just an example and any savings you make may be more or less based on your personal circumstances, the car you are insuring and how many years no claims you have.
Of course, if you never go on to make an at-fault claim then you would be significantly better off by not protecting your no-claims discount each year and so you need to make a decision that is right for you and your finances.
How to buy car insurance
When it comes to buying car insurance, one of the quickest and easiest ways is via a comparison site. Comparison sites allow you to compare multiple policies at once to find the best deal for your circumstances. We have partnered with Quotezone* so that you can search and compare quotes from over 110 UK car insurance providers. But it is worth considering that not all comparison sites are whole of market and so you may find a better deal directly with an insurer. You can also compare car insurance providers in our article, ‘Best car insurance in the UK‘.
When comparing car insurance have a look at the policy documents to check the terms and conditions if you make a claim, including how much your no-claims bonus will be reduced by. It is also worth comparing the cost of protecting your no-claims versus the discount you will save on your policy as this will help you to decide whether protecting your bonus is worthwhile.
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