A no-claim discount is offered by car insurance policies which are based on how many years you spend without making a claim. This means that the longer you spend without making a claim, the greater the discount will be.
Let us say you do not file a claim on your insurance policy for an entire year. That means you can get up to a 30% discount on the insurance premium for the next year. If you spend 5 years without a claim, you can get up to a 50% discount.
No claim discounts, also known as no claims bonus, work as a reward system; the insurer rewards you for not making any claims on your car insurance policy. No claim discounts also offer an incentive for people to drive safely and protect their car a lot better. Essentially, your insurer rewards you for being a responsible driver.
What You Should Know About No Claim Discounts
1. The No Claim Discount Is Linked to You, Not Your Car
No claim discounts are linked to you, not your car. That means you can replace your car or change your insurer without it affecting your no-claim discount. If you renew your policy, you will still be able to retain the discount.
The only thing you cannot do is transfer your claim discount to someone else. However, with some policies, there is an exception to this rule; if the policyholder dies, their heir will be able to use and retain their no-claim discount.
2. You Can Only Use It During the Policy Renewal
As you know by now, no claim discounts are provided for not making any claims. That means you can only use the discount when it is time to renew your insurance policy.
3. You Will Have to Transfer Your No Claim Discount
When you are selling or buying a new car, you will need to submit a buyer-seller agreement form and request a letter so you can transfer your no-claim discount to your existing insurer. Once you do this, your insurer will provide a certificate for your no-claim discount. Based on this, the discount will be transferred over.
4. You Cannot Make a Claim
To enjoy your no-claim discount, you need to make no claims at all. If you ever make one, no matter how small, your discount will go back to zero. Never make a claim, and you will be able to enjoy this perk.
5. There Is A Limit to the No Claim Discount
Everything ends and “no limit” discounts are not the exception. That is why there is a limit to NCDs. According to Uswitch, you will only ever be able to receive a maximum of 70/ 75% discount. Once you reach that point, the value of the discount will not increase, even if you do not make a claim in the future.
6. You Can Protect Your No Claim Discount
You can protect your no-claim discount by paying an additional premium. This will help you save your discount even when if you are making a claim.
7. It Does Not Apply to Third Parties
No claim discounts are offered only for the damage on your own property. This means you will not be able to use your no-claim discount for third-party insurance.
8. The No Claim Discount Will Be Gone If You Get Into An Accident
If you ever get into a car accident, your insurer will cover most of the necessary expenses, but a small part or the entirety of your no-claim discount will be gone. If your car gets stolen, the insurer will not be able to recover the expenses they make, so it is common for people to lose their no claim discounts.
If you do get into an accident and you are not fault, be sure to try claiming your insurance excess back.
9. No Claim Discounts Are Not Available Overseas
Most of the insurers operating in the UK do not allow no claim bonuses overseas. However, you can ask them about it. Some insurance companies in the UK do offer no claim discounts even if you are living overseas, so make sure to check.
10. You Can Not Use Your No Claim Discount for Two Cars at Once
There are two kinds of car insurance policies: single-car policies and multiple-car policies. A single-car policy only allows you to cover one vehicle, so you will not be allowed to use your no-claim discount for more than one car. With a multiple-car policy, you will be able to enjoy your no-claim discount on more than one vehicle.
How Long Does a No Claim Discount Last?
If you have been off the road for a while or you have not had car insurance, many insurers will allow you to use your no-claim discount. However, no claim discount is not forever, so this grace period will only be extended for up to two years.
If you spend more than two years without car insurance, then you will not be able to use your no-claim discount on your new car insurance policy. If you do not want to lose your no claim discount, make sure you get a new policy before the two years are up.
Being a responsible driver has many benefits. You keep yourself and others safe, you do not spend money on repairs, and you also get to enjoy a reward discount for being a good driver. That is what no claim discounts are for and they are a great perk to have.
No claim discounts encourage people to be better drivers. However, we are not always in full control of what happens while we are on the road. We can be careful and responsible all the time, but other people may not be as careful.
So, whether you have, are buying or leasing a car, be a good driver, stay safe, and avoid filing insurance policy claims whenever you can.
James Banerjee is a Senior Account Manager who graduated from the University of Kent in 2014. He works in SEO on clients such as HSBC UK and Nestle and he has a keen interest in personal finances and money-saving advice.