Building your no claims bonus to save money on car insurance?

What is a no claims bonus?

A no claims bonus is a car insurance discount earned for driving without making a claim. It is deducted as a percentage from your total premium cost.

How do you earn a no claims bonus?

After driving for a full year without making a claim on your car insurance policy you earn a no claims bonus and receive a discount on your premium at renewal.

No claims discounts are measured in years, so the more consecutive years you drive without claiming, the larger your savings each time you renew.

Each full year must be with the same insurer, so you would not earn a bonus if you cancelled or switched your policy to a new company part way through the year.

How much can you save on car insurance?

You could save up to 75% on your premium, but this will depend on what your insurer offers. To get the highest discount you need a no claims bonus of at least five years.

This table shows a rough guide of the level of discount you could get as you build up your no claims:

Building a no claims discount is one of the best ways to save on your car insurance, but you can also try these ten ways to cut your costs.

A no claims bonus example:

If you have gained 2 years no claims bonus with a 40% discount on a policy that would have cost you £800, you would get a discount of £320 which means you will pay £580 for your cover.

How do you lose your bonus?

When you make a claim, perhaps following an accident, you will lose your discount or have it reduced, depending on how many years no claims bonus you have. Many car insurance companies* only reduce your discount, rather than withdrawing it entirely, if you have three or more years of no claims, depending on how many claims you make:

*This scale is used by Aviva, Churchill, Directline and Tesco Bank, but check your policy document carefully as not all companies follow this.

Will every claim affect your bonus?

Not always, but even if the accident you are claiming for wasn’t your fault, you could still lose your bonus. However, if your insurer can reclaim all the costs from the other party, your no claims should not be affected.

Repairing windscreen damage, like chips or small cracks, will usually not affect your no claims bonus. If the damage is more extensive, for example the windscreen needs to be replaced, this may count as a standard claim and you could lose your discount.

Here is a step by step guide to the claiming process, including what happens when an accident is not your fault.

How do you make a car insurance claim?

Could you lose your bonus if a named driver claims?

This will depend on your insurer, but in many cases you will lose your discount if a named driver claims on your policy.

Some policies allow a named driver to earn no claims, but not many. If yours does, check your policy carefully to see if both discounts will be affected by a claim.

You can find out more about adding a named driver to your policy here.

Protecting your no claims bonus

Some car insurance companies offer no claims bonus protection on their comprehensive cover plans, while most that don’t will give you the option of adding this cover at an additional cost, which means you can make a claim without it affecting your discount.

While making a claim on your car insurance policy does not necessarily affect your no claims bonus, your renewal premium may still increase as most insurers will factor in any claims on your renewal quotes and apply the discount at the end..

Most policies allow one claim per year without it affecting your bonus, but some may state that you cannot make more than two claims in three years. Check your policy to see exactly where you stand.

Is it worth protecting your no claims?

If you have several years of no claims, protecting your bonus could save you money if you do have an accident and need to make a claim.

No claims protection can come to around 10% of your policy's cost, so if your premium is £300 a year, you will need to pay another £30 to protect your no claims. For example:

• If you have five years of no claims and pay £330 a year including protection, your discount will be unaffected if you make a single claim.

• If you chose not to protect your no claims your premium would be £300, but after making a claim your discount will be reduced to three years at renewal, which could reduce your discount from 75% to 50%.

Remember that your premium will probably go up if you claim, even if you have protected your discount.

Most insurers will not give you the option of protecting your bonus until you have at least three years of no claims.

Should you avoid claiming to protect your bonus?

This depends on the cost of repairing the damage and the number of years of no claims you have. If the damage is relatively cheap to repair and you have several years of no claims, then it may be better to pay yourself.

Read our guide on making a car insurance claim for help working out when you should make a claim.

An example of claiming vs paying yourself

If you have five years of no claims that saves you £300 a year, it may be worth paying to repair your car yourself if the cost is less than this. Remember that if you do claim you will also need to pay the policy excess so make sure you factor this in.

In the above example, if you have to pay a total excess of £100, claiming would cost you £400 (including the loss of your discount). If repairing your car would only cost £250, it will be cheaper to pay for this yourself.

Can you transfer your no claims bonus?

Yes, you can carry the no claims bonus you have built up over to another car insurance provider when you switch.

Your new insurer will want to see proof of your no claims once you take out your policy. Without it they may increase your premium or cancel your cover.

You can get proof from your previous insurance company, but how you receive it differs between insurers. You can:

• Find your annual renewal letter showing no claims

• Call and request they send you proof by post or email

• Print a document from your online policy

Check by calling your insurer to find out how you can get your proof of no claims. They should be able to send duplicates if you cannot find your documents.