By Nathan Barnett, Editor at Finance.co.uk. Last updated 29th April 2024.
A no claims bonus rewards consistently safe drivers who don't claim on their car insurance, saving them money when renewing or taking out new insurance.
A no claims bonus is a discount given by car insurers to drivers as a reward for not making a claim on their car insurance.
The longer you go without claiming on your car insurance, the more ‘no claims’ bonus you’ll accrue. Insurers have been known to offer discounts of up to 60% for experienced drivers with a long history of not making a claim.
No claims bonuses can typically be transferred between insurance providers and can often vary, so it can be worth shopping around to find the best deal next time your insurance is up for renewal.
Almost all types of vehicle insurance will offer no claims discounts; this includes all types of cover, such as comprehensive, third party and third party fire and theft. For every year that you have insurance but don’t need to make a claim, you’ll earn another year's no claims discount.
Typically, in order to earn a no claims bonus, you’ll need to be the policyholder and not just a named driver on the policy.
Insurance providers will reduce your insurance premiums by a set percentage determined by the number of years you’ve been driving without making a claim. Most insurers will allow you to earn up to nine years of no claims bonus; others will cut off at five years.
The amount you can save will vary depending on how many years of no claims you have and your insurer.
Some insurers will offer up to a 60% discount for 5 or more years with no claims. The amount you save per year of no claims can vary significantly, with some insurers offering a 5% discount for one year of no claims and others offering 30% for the same timeframe.
It’s important to remember that the number of years no claims you have is only one factor used to determine the cost of your insurance premiums, and prices can still vary significantly depending on your age, driving experience, the car you drive and where you live.
If you switch insurers when your car insurance is up for renewal, you’ll usually be able to transfer your no claims, though in some cases, you may need to get proof of how many years no claims you have from your current/previous insurer.
If you buy a new car, you should be able to transfer your no claims from your old car, but you can usually only use your no claims bonus on one car at a time. If you’ve previously had a company car covered for personal use, you may be able to use any no claims you’ve built up, but you’ll need to get proof of your no claims from the insurance provider of your company car.
On the majority of policies, only the policyholder will earn a no claims bonus.
Although a handful of insurers may offer no claims bonuses to named drivers. If you’ve only ever been a named driver and have never had your own car insurance, you’ll have to start your no claims from scratch once you take out your own policy.
There are some instances where claiming on your insurance won’t affect your no claims bonus, such as;
When you claim on your car insurance, but you’re found not to be at fault, it typically won’t impact your no claims bonus. This is because the insurer will be able to recover any money they’ve paid out to you.
If you’ve built up a significant number of years of no claims, it may be worth protecting your no claims bonus.
No claims protection is typically an optional extra on your insurance policy and will usually let you make a specific number of claims within a certain period without losing your no claims discount.
Although it will initially cost you more to protect your no claims discount, if you’ve built up over 5 years worth and you need to make a claim, you’ll typically find your insurance is much more expensive with zero no claims discount, than the money it will cost you to protect your no claims.
Deciding whether or not to pay to protect your no claims is a personal decision and depends on how much you’re willing to risk losing your no claims. While some may argue it’s a cost you’ll never get back if you don’t have an accident, others will argue if you were to have an accident, it’s definitely worth the extra money.
The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.
