No-claims bonuses and discount explained

What’s a no-claims bonus?

It’s a discount you get on your car insurance for every year you’ve driven without making a claim.

Each year the cost of your insurance is reduced as a percentage up to a max threshold - the higher the number of years, the greater the discount.

Your NCD is valuable. It shows insurers you’re a safer driver, so cuts the cost of your car insurance. If you’ve built up years of claim-free driving its worth protecting. Think carefully before you claim if the cost of repair is relatively small.

There’s no difference between bonus and discount. The terms are largely interchangeable when it comes to no-claims. Some companies refer to an NCB, others an NCD.

It’s the amount of discount that’s crucial, and what you can get depends on your insurer. They all offer different rates, so keep it in mind when shopping around for cover.

How does a no claims bonus work?

The amount of no claims bonus you get depends on the number of years you’ve been driving without making a claim on your insurance. The actual amount of discount varies by insurer though.

For example, your insurer could offer a 30% discount for your first year of claim free driving, and then 10% for each additional year after that. If you’ve had five years with no claims, your discount amount would be 70% (which is commonly the maximum amount offered).

If you need to claim, you’ll likely lose your no claims discount - even if the incident wasn’t your fault - so you’ll need to build it back up again.

Building up your NCB

The only way to build up an NCB is to drive without making a claim. After a year, you'll have 12 months NCB to benefit from.

The discount offered between insurers will differ, but it will grow every year if you don’t make any claims.

Named drivers and no-claims bonuses

With a few insurers named drivers can earn NCB, which can be helpful when they come to take out their own insurance policies. It’s worth checking - according to Defaqto, 10% of 325 comprehensive car insurance policies allowed a named driver to earn an NCD.^[1]

Transferring NCD to a new car

You can transfer your NCD to another or new car, but you’ll need to provide proof of how much NCB you’ve built up.

You just need to ask the new insurer what evidence they need. Normally it should be provided by your existing insurer.

How do I get my no claims bonus discount?

It’s usually applied automatically. When you get your renewal letter, it should say on there how many years of no claims bonus you have, which you can use as proof of your no claims discount if you switch insurers.

Protecting your NCB

You can protect or guarantee your NCB too. If you have several years claims-free driving under your belt, then it might be worth spending extra to protect it.

NCB protection should allow you to make a claim, or even more than one, without impacting your discount, or only reducing it by a year or two - it varies between insurers.

The key is to weigh up the cost of protection against the discount. If you don’t make any claims, then it’s just an extra cost.