Insurers promote a no claim bonus on car insurance to reward safe drivers and those who don't claim on their insurance.
A no claim bonus (also called a no claims discount, safe driver reward, no claim bonus rating scheme, or rating level) typically gives you a discount on your car insurance.
This discount can be anywhere up to 60% in the first year. The discount increases each year if you don't claim, up to a maximum number of years.
This sounds like a big saving. But a no claim bonus doesn't always reduce the cost of your insurance.
How your no claim bonus is calculated
To get a no claim bonus, you usually need to have comprehensive car insurance.
Your insurer calculates your bonus by looking at:
- how long you (and any other drivers on your policy) have been driving
- your claims history, including any claims by other drivers on your policy
- your rating from your previous car insurer
To find your rating, check your current car insurance policy.
Generally, ratings start at 6 and reduce by one for each year you don't claim. For example, 'Rating 1' drivers haven't made a claim for the last five years (this is usually the maximum number).
If you have no car insurance history, insurers may look at your driving record to calculate your bonus.
How the no claim bonus affects the cost of your insurance
The no claim bonus and the way insurers apply it can differ. For example, they may:
- limit how long you get the bonus for
- increase your premium if you have a minor accident (even if you don't make a claim)
- set a minimum premium amount
- reduce your bonus if you make certain claims
This means that you may end up paying roughly the original premium after a few years.
If you’re struggling to pay your car insurance premiums or excess, contact your insurer straight away. Explain your situation and tell them you would like to apply for financial hardship.
For example, they may provide assistance to meet your excess if you have an accident and you're at fault and need to make a claim.
How claiming affects your no claim bonus
Insurers have different terms and conditions about how claiming affects your bonus.
Generally, if you're at fault and you make a claim, you'll either lose your bonus or it will be reduced. This means the cost of your insurance will go up.
Even if you're not at fault, insurers may increase your premium after you make a claim. They may do this based on:
- not being able to recover the costs for your claim from the other driver
- the type of accident — for example, theft, windscreen damage, or hitting an animal may be considered 'at fault' claims
Paying for no claim bonus protection
Some insurance companies offer no claim bonus protection. This means you pay extra so that your bonus is not affected when you make a claim.
If you decide to pay for this protection, read the small print in the policy. Often the cost of protection can be higher than your no claims bonus discount. And it doesn't always stop your premium going up after a claim.
Transferring your no claim bonus
Some insurers let you include your existing no claim bonus (or rating level) as part of a new policy.
However, you can't usually apply your bonus to a policy that's for another car.
If you don't drive for a few years (usually two or more), then you may lose your no claim bonus.
Don't stay with your current insurer just for your no claim bonus or rating level. You could get a better deal elsewhere. See choosing car insurance for what to look for.