Car insurance explained

Car insurance explained

How a no claims bonus works

A no claims bonus is a discount that insurance providers offer if you have a history of driving without making a claim.  

Need to work out if you’re eligible for the bonus? How to prove you’ve made no claims in recent years and how much you could save? This one’s for you.

What is a no claims bonus? 

A no claims bonus is where you are given money off your insurance premium for not claiming in the year (or years) before.

When you get your insurance, insurers make a ton of calculations to work out the chance of you making a claim. Claims are expensive for insurers, so if they think you’re more likely to make one, your insurance premium will be higher to make up for that. 

One of the ways they judge your risk of claiming is by looking at the number of claims you make over time. Driving for many years without making many claims suggests that you are a low risk driver.

So to reward and encourage that sort of driving, insurers offer money off your premium in the form of the no claims bonus.

Will a no claims bonus make my insurance premium cheaper?

A no claims bonus will give you a discount on your next year’s premium, so it will be cheaper than if you didn’t have it.

However, your claims history isn’t the only factor that affects how much your premium is. Your details (like how much you drive, where you live, why you use your car) and the insurance market play a big role. So if these change, then your premium may still go up overall.

Do all claims affect my no claims bonus?

In general, your no claims bonus won’t be affected if the incident that caused the damage isn’t your fault. In this case, you’ll likely be able to claim through the other drivers’ insurance.

If the other driver was uninsured or you can’t claim against their insurance for another reason, you might claim on your own policy. However, this also shouldn’t affect your no claims bonus.

How many years of no claims do I need to receive the bonus?

This will depend on your insurer but in most cases, you only need one year of car insurance without claiming to start receiving a no claim bonus. And as you notch up more years without claiming, your discount will usually increase.

This is one of the reasons why people with less driving experience, such as a young driver, might pay more for their insurance.

Some newer drivers choose to get telematics or black box car insurance to (hopefully) show insurers that they drive safely. A tracking device installed on the car sends info about their speed, cornering and more to the insurers. It can give a real time picture that you’re a ‘safe’ driver and so less likely to make a claim.

How many years is a full no claims bonus?

Most insurers increase the discount you get for not claiming for five years – some are six, some are five, but it is usually around there. Check your policy so you know the situation with your insurer. On the fifth (or fourth or sixth!) year, you get a ‘full no claims’ discount.  Again it’s worth checking as insurers vary, but with most you’ll continue to get this full discount every year until you make a claim. 

How does my insurance provider calculate my no claims bonus?

This is simple. If you’re a new customer they’ll ask you how many years you’ve been claims-free. It is your responsibility to answer this question accurately, so check your last renewal notice if you aren’t sure.

After just one year of driving without a claim, you’ll receive a discount on your next year’s policy. After the second year of driving without a claim, you get a larger discount. And so on…

How do I check if I’m eligible have a no claims bonus?

Usually claims are pretty memorable, so you’ll know whether you’ve made one in the past few years.  As long as you haven’t claimed AND you’ve had car insurance for that period, you’ll be eligible for the bonus.  If you haven’t been insured, been driving as a named driver, had short term insurance or been on a trade policy, it’s likely you won’t be eligible, whether or not you’ve claimed.

As the driver, proof of no claims is down to you, not your insurer. This means that if you don’t provide evidence, you won’t get the discount. 

Documents you’ll need to provide evidence:

When it comes to proving no claims, there are only two documents that are generally accepted as proof. These are:

  • Your latest renewal invitation letter
  • A letter from your previous insurer stating years of no claims

Your insurer may ask you to must submit one of these when you buy a new car insurance policy to check your no claims. Alternatively, they may not ask but use a database to check the information independently.

Can I transfer no claims bonus from another insurance company?

Yes, it’s possible to transfer your no claims bonus from your previous insurer, as long as they’re also UK-based. All that’s required is your renewal notice or a letter of proof, which you can request from the insurer when you switch over.

If you’ve driven abroad it’s harder to transfer no claims and many insurers might not accept it at all. Check your insurer’s policy before declaring whether your time claims-free driving abroad makes you eligible for a no claims bonus or not.  (It’s important to check, as it’s your responsibility to declare this information accurately.)

You can transfer a no claims bonus from one vehicle to another. In the UK, you insure the driver in the car, not the car itself. So even when buying a new car, you keep the no claims bonus.

Will my no claims bonus expire?

A no claims bonus can expire due to inactivity.

If you’ve driven without a break from one policy period to the next, this shouldn’t be a concern. But if, for whatever reason, you take a break from driving, you may lose your no claims bonus.

Insurers vary with the length of time that they allow before cancelling your no claims bonus. For most, this period of time is two years. But as always, check with your insurer as it may vary.

No claims bonus protection

If you need to make a claim after many years of no claims bonuses, then your next year’s premium will likely increase.

But you may be able to get no claims bonus protection (NCB protection) insurance.

NCB protection allows you to make a certain number of claims without completely losing your no claims bonus. You can pay an add-on fee to your annual insurance to protect the benefits of your clean driving history.

It means that even if you need to make a claim, you keep some level of policy discount.

Is it worth protecting no claims bonus?

Here are some points to think about:

  • is it affordable if you need to claim?
  • how many years would you be protecting?
  • would it make a difference to your next premium if you claim?

Two tables below show the difference between having protection and no protection for your NCB. They show the level of discount applied to your policy at boom:

Effect on no claims bonus WITHOUT protection:

Years of no claims discount built upIf you make 1 claimIf you make 2 claimsIf you make 3+ claims
5NCB reduced to 3 yearsNCB reduced to 1 yearNO NCB
4NCB reduced to 2 yearsNO NCBNO NCB
3NCB reduced to 1 yearNO NCBNO NCB

Effect on no claims bonus WITH protection:

Years of no claims discount built upIf you make 1 claimIf you make 2 claimsIf you make 3 claimsIf you make 4 claimsIf you make 5+ claims
5NCB remains at 5 yearsNCB remains at 5 yearsNCB reduced to 3 yearsNCB reduced to 1 yearNO NCB
4NCB remains at 4 yearsNCB remains at 4 yearsNCB reduced to 2 yearsNo NCBNo NCB
3NCB remains at 3 yearsNCB remains at 3 yearsNCB reduced to 1 yearNo NCBNo NCB
2NCB remains at 2 yearsNCB remains at 2 yearsNo NCBNo NCBNo NCB
1NCB remains at 1 yearNCB remains at 1 yearNo NCBNo NCBNo NCB

Do I lose my no claims if somebody hits my car?

This depends – and every insurance provider is different.

As a general rule, you don’t lose your no-claims bonus if the accident isn’t your fault. This is because you’d usually claim against the other driver’s insurer.

However, if the other driver doesn’t have insurance then you’ll need to check with your insurer.

At boom, our uninsured drivers promise means that you won’t lose your no claims bonus in this situation.

So there you have it. Everything you need to know about the no claims bonus and the discounts it can get you. If you want to find out more about other things that affect the cost of your insurance premium, then check out this blog.

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