Does your no claims bonus really reduce your car insurance – and by how much?

DRIVERS who rack up years of no claims bonuses can see their car insurance premiums drop considerably.

A no claims bonus is a badge of honour for drivers who haven’t had an accident or asked their insurer for a pay out for at least a year.

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Experienced drivers can rack up years, or even decades, of no claims bonus – and the better yours is, the less you pay for insurance

We take a look at how your no claims bonus can reduce your car insurance and by how much? 

What is a no-claims bonus?

A no claims bonus is the amount your insurer takes off your insurance premium if you haven’t had an accident in the previous year. 

For each year that you don’t make a claim on your car insurance, you’ll enjoy a greater discount on your premiums.

If you do get into a crash and make a claim, your no-claims record will likely be wiped and you’ll see your premiums go up the next time it comes around.

There’s no set formula for how much of a discount you’ll get for not making claims, but getting the first year under your belt can make a big difference, especially for younger drivers.

For instance, according to Which?, your insurer might reward you with 30% for one year then 50% for five years.

How much can a no-claims bonus reduce by insurance by?

It depends on a lot of things, including what type of motor cover you’re taking out and just how many years of no-claims you have.

First of all, you need to look at the different premiums available.

This isn’t always easy to find out but will make it easier to know how much you’ll be saving with your no claims bonus.

According to figures from Confused.com, a driver with five years NCB would pay an average of £713 for car insurance compared to just £559 for a driver with nine years no-claims.

But a no-claims discount isn’t the only consideration when choosing a motor policy and you shouldn’t always just go for the cheapest deal.

Shop around using a comparison site such as GoCompare or Confused.com and be sure to compare all aspects of the policy such as the excess or whether breakdown cover is included.

Alex Kindred, car insurance expert at Confused.com said: “Generally, a no-claims bonus could get you a discount on your car insurance.

“Although the number of years no-claims bonus that you build can be unlimited or continue to grow each year, some insurers might cap the discount you can get after five years so it’s worth double-checking what your current insurer offers.

“If you think you could benefit from a no-claims bonus, there’s no harm in exploring other insurers and finding the best options that could save yourself some money.”

Can a claim affect my no-claims bonus?

Yes – if you make a claim on your car insurance then you will lose some of your no-claims bonus.

AA has a “step-back” scale which will determine how much of the discount you will lose, compared to previous years. 

For instance, if a driver has made no claims in five years, they can typically get a discount of up to 60%.

If the motorist then makes a claim, some of the 60% bonus will be lost and could be reduced to the equivalent of a three or four-year discount.

That could mean you get a 40% discount, despite having previously built up a longer no claims record.

Should I get cover for my no-claims bonus?

No-claims protection is an add-on you can choose to buy when you take out car insurance.

It normally costs around £60 for the year and could save you some cash if you make a claim.

The cover lets you make a certain number of “at fault” claims without affecting your no-claims discount.

The extent of the cover will vary so you’ll have to check what is covered on your policy.

You’ll also need to work out if it is worth buying no-claims bonus protection, and whether the extra outlay is worth what you might save on premiums were you to make a claim.

So the bigger your no-claims bonus the more you can lose through making a claim on your car and the overall greater value of the protection. 

Can I keep no-claims discount if I switch insurance providers?

Yes. To do this, you need proof of your NCD, and usually, it has to be in writing. 

Your previous insurer will usually send this through after your policy has ended.

Your new insurance provider will then most likely ask for proof of policy after a few days. 

Make sure you have this ready as your policy could be cancelled if you fail to provide proof or you could be charged an admin fee or an additional premium. 

We’ve previously looked at how you can save £500 on your car insurance with some simple tips.

And one insurance expert says there are six ways you can cut your premiums.