How does a no claims bonus work?

If you’ve got car insurance, you’ll almost certainly have heard about or been asked about a ‘no claims bonus’ – sometimes referred to as a ‘no claims discount’.

While talk of your no claims bonus is common when you’re shopping for insurance, we get a lot of questions from people who aren’t 100% certain they understand what a no claims discount is all about – and that could mean they’re missing out on big savings.

Here, we’ll explore everything there is to know about this specialist car insurance feature – including how a no claims discount works, how protected no claims work, and what happens to your bonus if you have an accident.

How does a no claims discount work?

Essentially, a no claims bonus is a way of unlocking a percentage discount offered by an insurance company. 
The way of measuring no claims is universal; it’s done in full years – with 1 year as a minimum, and, ordinarily, 5 as a maximum. While 5 is the industry standard maximum, some insurers keep applying a discount until you’ve reached 15 claim-free years. Every time you go a full 12 months without making a claim, you add another year to your discount.

So, while the way of measuring no claims is the same across all insurers, the discount that is applied for different amounts of no claims isn’t – with some insurers offering a small discount, whereas others offer up to 75% or 80% off your quote if you have what they consider to be the maximum amount.

Now, it’s important to remember that an accident doesn’t necessarily result in a claim – so, you might have a bump in your car, decide to pay for the repair yourself, and therefore keep your no claims bonus intact. By law, you must report your accident to your insurer, but unless you claim, you’ll keep your discount.

How does protected no claims work?

With the basic idea behind a no claims bonus explained – it’s time to cover a ‘protected’ no claims discount – a discount that’s still applied even if you have made a recent claim.

Confused?

Don’t be – the idea is easy to get your head around. 

When you rack up a few years of no claims bonus – you’ll be able to pay your next insurer to ‘protect’ them with your next policy. If you make a claim, it still goes on your record – just as an accident does, but you still get your discount to apply to the overall price.

The thing is, a no claims discount is applied after your quote is put together. So, if you’ve had no claims and no accidents for 5 years, you might find your non-discounted price is quite low – let’s say £300 as an example. If your insurer offers a 50% full no-claim bonus, this means your annual insurance cost will be £150. 

Now, let’s think about that price again but with a few accidents under your belt.

If you’ve got 5 years of protected no claims – but you’ve had 3 accidents in that same timeframe, your non-discounted price is likely to be much higher – let’s say £1,000. Of course, your no claims bonus is safe – so you can still apply your 50% discount, bringing the price down to £500. 

With this quick illustration, you can probably see that a no claims bonus doesn’t guarantee a low car insurance price – it simply offers a discount – and with protected no claims that discount’s safe, even if your motoring history causes your insurance cost to go up significantly.

How does no claims bonus work after an accident?

You might assume that an accident will spell a complete end to your no claims discount – but in actual fact, insurers offer a little more leeway than that. 

When you make a claim, your insurer will actually use a ‘step-back’ scale to push your no claims backwards. Every insurer’s scale is slightly different, but you tend to find that a single claim will push 5 years of no claims bonus back to just 3. If you’re concerned about what this scale could look like, you’ll find it in the terms and conditions of most providers policy documents for you to explore in more detail. 

Will a chipped windscreen mean I lose my no claims?

Fortunately, not all claims will damage any bonus you’ve built up. Generally speaking, you’ll only find your no claims pushed backwards if it’s decided the accident or incident you claim for is an ‘at-fault’ claim – meaning there’s no other party your insurer can claim from.

So, if someone’s reversed into your in a supermarket carpark, your no claims should be safe. However, if you’re the one that’s reversed into someone else, you’re going to lose some of that bonus.

Although glass claims are often considered to be an ‘at-fault’ claim (since there’s no other guilty party) these are generally won’t impact your no claims bonus either.

How does a no claims bonus work on 2 cars?

With more and more insurance companies offering ‘multi-car’ policies, we’re often asked how a no claims bonus works on 2 or more different cars.

The answer, unfortunately, is that it doesn’t. Multi-car policies give you all the perks of individual policies – which also means your no claims bonus will follow you – and also means other people driving the family’s cars can collect their own no claims bonus at the same time. Not ideal if you fancy a big discount across all your cars – but perfect for other people who are hoping to build up their own discounts.