A Quick Guide to Car Insurance No-Claims Discounts

A no-claims discount, also known as a no-claims bonus, is a reward that motor insurers grant to their policyholders who do not make any claims on their policies. It comes in the form of a discount on premiums in future years. The idea is to reward policyholders for safe driving.

- How Much Is The Discount?

The discount varies from insurer to insurer. As a general rule it will be around 15% after one year and will rise steadily from year to year. Most insurers continue building the discount for around five years, at which point the discount is usually capped in the 50% range.

- What Happens If The Driver Makes A Claim?

The discount is not necessarily lost, but rather “stepped back” for each claim. For example, somebody who has built up a no claims discount over four years and then makes a claim might have their discount reduced to that offered to people who have gone two years without a claim.

- Which Claims Affect The Discount?

Any claim that leads to a payment can affect the discount, though generally this doesn’t happen with “knock for knock” cases. This is where both drivers have suffered similar damage to their vehicles and agree they are equally at fault, leading to the respective insurers agreeing to pay their own policyholder rather than the other driver.

If an insurer has made a payment to a policyholder that it intends to claim back from another insurer (for example, the driver responsible for an accident) but has not yet received this money, it may be counted against a no claims discount at renewal time.

It’s very important to note that the discount does not necessarily take any account of fault (unless this affects who pays out for a claim). For example, if a driver’s car is stolen, they will likely lose their no claims discount.

- What Happens If The Driver Changes Insurer?

Many insurers will take past records of new clients into account and offer a no claims discount. They will usually ask for documentation from the previous insurer confirming what (if any) claims the policyholder made.

- What Happens If Two People Share A Car?

The no claims discount solely affects the driver rather than a specific vehicle. If one partner has an accident in the car, it won’t affect the other driver’s discount.

- What Does Protecting The Discount Mean?

Drivers who have built up the maximum discount can pay an additional premium on top of their discounted rate. This protects the no claims bonus, meaning that if they make a claim, they won’t lose the discount the next year. There may be limits such as only one claim being allowed without losing this protection, and the premium may still rise in future years as a result of the claim.

- What If I Decide Not To Claim On My Policy After An Accident To Protect My Discount?

In some cases, a minor prang may be cheaper to pay to repair than lose a discount. Before deciding on this course of action, you need to be clear about what any other party in the accident intends to do regarding insurance claims. If you decide not to claim, check your policy carefully as you may still be required to notify the insurer of the accident. You may also have to detail the accident on future insurance applications.

You can read more car insurance articles like this one at http://ift.tt/1EtwN2L where you’ll also find a directory of motor insurers making it easy to compare car insurance companies based upon ratings and customer reviews.

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