What is a No Claims Bonus & What Does it Mean?

Piggy bank with coinsWhat does it mean when your insurer asks if you have any no claims bonus? At Insure Your Motor, we’re asked lots of questions about no claims bonuses, which we hope to answer here.

A No Claims Bonus is a reward given to drivers who have not made a claim on their motor insurance during their policy period, which is usually for one year.

This No Claims Bonus is then translated into a saving on the following year’s premium as a reward for not making a claim. For each year the policy-holder does not make a claim, they are rewarded with another year’s No Claims Bonus which, when added up, can relate to substantial savings.

Most companies recognise a maximum of five years No Claims Bonus.

Frequently Asked Questions About No Claims Bonuses

Click on a question below to skip to information about it.

Everything you needed to know about No Claims Bonuses

What does NCB and NCD stand for?

NCB stands for No Claims Bonus and NCD stands for No Claims Discount. In essence they all mean the same thing. You’ll often see them abbreviated like that in insurance terms.

Can I use my No Claims Bonus on more than one car?

The short answer to this is “No”. A No Claims Bonus can only be used on one car at a time. However, having a NCD on one car (evidence that you are a careful driver) may entitle you to an introductory or “second car” discount on another policy if you mention it to the insurer you are getting quotes from.

Does a No Claims Bonus apply to the car or the policy-holder?

Your No Claims Bonus applies to the policy-holder. Think of it like this: the discount rewards your careful driving, not something the car could achieve without you!

I’m a named driver on my partner’s/parents’ insurance – do I get a No Claims Discount?

Not usually, no, though a few insurers do count years as a named driver for NCD, so it’s worth asking. Most commonly, only the policy-holder earns the No Claims Discount. If you subsequently have your own car and need insurance in your own name, or you become the main driver on your partner’s/parents’ vehicle, you’ll need to have your own policy. That’s why it’s important to take out your own insurance as soon as you can so you start to build up your own No Claims Discount.

I’ve not had motor insurance for a few years – is my No Claims Bonus still valid?

Most commonly, No Claims Bonus will remain valid for two to three years, depending on which insurer you’re taking a policy out with. A few won’t accept a NCB if it’s been more than 12 months since the end of your last period of insurance. If it’s been more than a couple of years since you last took out a policy, you may have to start again.

Can I transfer my No Claims Discount from another insurer?

Yes, as long as they provide you with “proof” to substantiate your claim for that level of entitlement with your new insurance company. It’s worth noting that your years of claim-free driving might not give you the same discount with every insurance company, who all have their own scale of discounts.

What is “proof of No Claims Bonus”?

This is often asked for by a new insurer and it’s evidence that you are entitled to the right discount on your motor insurance premium. It must show your full name, address, post-code and the number of years No Claims Discount to which you are entitled.

You can obtain your proof of No Claims Bonus in a couple of ways: it’s usually stated on your insurance renewal letter or on the cancellation notice they send you if you cancel you policy. If you don’t have it, contact your previous insurer and ask them to send you proof of your No Claims Bonus while you were insured with them.

How much discount will I get after 1 year?

It varies between insurers, but it might range between 10% and 30% after just one year’s claim free driving.

How does an accident affect my No Claims Discount?

There are a few scenarios here. If you are at fault in an accident, a situation in which your insurance company is unlikely to be able to recover their costs, your No Claims Bonus will be affected. It usually steps back by two years. For example if you previously had 5 years NCB, it would reduce to just 3 at the next renewal. If you only had 2 years NCB at the time of the accident, you would lost it all and have to start again.

However, if you are not at fault in an accident and the other driver (the third party) is insured, your insurance company will be able to recover their costs from the third party insurers. If all costs are recovered, your No Claims Bonus won’t be affected at renewal.

In the case of your vehicle being stolen, your NCB will usually be affected because it’s not often that the thieves are caught and all costs recovered by the insurance company.

You will be better off if you pay an extra fee for Protected No Claims Bonus. This will safeguard your NCB even in the event of an at-fault claim (to a certain extent – we cover this in more detail below).

Does a third party claim on my insurance affect my No Claims Bonus?

If you are found to be liable, yes, a third party claim will affect your No Claims Bonus at your next renewal. If you have Protected No Claims Bonus, this should prevent your bonus being affected to the same extent.

I had a company car in my old job. Will I get a No Claims Bonus on my new insurance policy?

Was the company car used solely by you and for both personal and business use? If so, a new insurer should accept a written statement (on company-headed paper) to that effect from your previous employer, along with details of any accidents you had and claims the company made on your behalf to the insurance company. They’ll also need to add how many years accident and claim-free driving you’ve had since the last incident/claim and when the insurance lapsed.

This will usually be sufficient for an insurer to agree to give you the correct level of No Claims Bonus on a personal policy taken out in your own name.

Does a No Claims Bonus run from year-to-year or policy-to-policy?

Each level of No Claims Bonus is earned through a complete period of insurance, usually 12 months. If you switch insurance companies in the middle of a period of insurance, you will be entitled to the same level of No Claims Bonus as when you left your old insurer, and a new 12 month period of insurance then commences with your new insurer.

This might mean it takes longer to go up to the next level of discount, but if you are getting a lower basic premium than your old insurer, it might still be cheaper to make the switch mid-year. Most people wait until a policy is due for renewal before shopping around.

What does “Step Back” mean on the No Claims Bonus scale?

If you make an “at-fault” claim on your insurance, you won’t necessarily lose all your No Claims Bonus when it comes to renewing your policy. As a general rule of thumb, your bonus will “step-back” by two years for each claim. So if you had five years’ NCB (and a 65% discount), one at-fault claim might step back your NCB to 3 years and 50%. A second claim would reduce the discount to 30% and 1 year. A third claim would see you lose all discounts.

Not all insurers follow the same scale, so make enquiries at the quotation stage.

What is a Protected No Claims Discount?

If you have spent 5 years building up a big discount on your insurance (up to 75% from some insurance companies), you might want to safeguard it by paying an extra fee to protect it. This essentially means that even if you make an at-fault claim, your No Claims Bonus won’t step-back by the usual two years.

Not all motor insurers have the same rules though. Some run schemes which allow you to make up to two claims in five years, for others the limit is two claims in three years, so be sure to read the small print before committing yourself.

Is It Worth Protecting a No Claims Bonus?

Another factor to take into account is the cost of protecting your bonus. If the added cost is more than the loss of the discount when the “step-back” scale is applied following a claim, it may not be financially worth your while. Most people do find though, that protecting their NCB is worth doing.

What is the maximum No Claims Discount?

The typical maximum is 5 years and up to 75% discount, although we have seen rare instances of insurers offering up to 15 years and 90% discount.

How can a young driver get a No Claims Bonus?

Young drivers often start out as a named driver on their parents’ insurance policy, which might be a cheaper way to start out, but has the adverse effect of delaying them building up their own No Claims Bonus. In rare situations, an insurer will give a named driver a NCB, but the proviso will be that they have to take out insurance with their own company, which might not offer the cheapest premium.

The best way for a named driver to start earning a NCB is to take out their own motor insurance policy as soon as they can. There are ways to keep the premium as low as possible for young drivers, which can cushion the expense. After a year or so, the discount you’ve earned will make the cost of motor insurance much cheaper at renewal.

I don’t have a No Claims Bonus yet. Am I entitled to one?

It depends on your situation. If you’ve been a named driver on someone else’s policy for a number of years, it’s rare to be allowed a No Claims Bonus of your own, but the information in the question above might help.

If you’ve been driving a company car, you probably will be able to transfer any years of claim- and accident-free driving into a No Claims Bonus on your own policy, subject to getting the right proof of NCB (see this information, above).

And if you’re a new driver, just passed your test, we’re afraid you do have to start earning your No Claims Bonus from scratch.

Can I get a NCB if I’ve been living and driving abroad?

You should be in luck if your previous No Claims Bonus has been earned in an EU country. You will still need to provide evidence of your NCB to your UK insurer though. If you’ve been insured in a non-EU country, it could be trickier. If you’re getting insurance quotes, ask what is accepctable – you might need to get a translation of your evidence of No Claims Bonus at yuor own expense.

How does “knock for knock” affect my No Claims Bonus?

A Knock for Knock agreement means that in the event of an accident between two parties where liability is disputed, both insurance companies agree to settle the costs of their own policy-holder (assuming they both have fully comprehensive insurance). This in no way resolves the question of liability, but it’s a time- and cost-saving method for the insurance companies, where lengthy wrangling over who was at fault can be very expensive.

A Knock for Knock settlement will affect your No Claims Bonus though, which can be seen as very unfair if you’re positive the accident was not your fault. You are free to pursue the third party for your uninsured losses (the excess on your claim or the cost of repairs if you don’t have comprehenive cover, for example) and if you are successful in establishing that they were at fault, your insurance company will reinstate your No Claims Bonus to the level it was at before the accident.

How to increase your chance of keeping your no claims bonus

Drive Carefully and follow the Highway Code – A good way to help protect your no claims bonus is to drive carefully and observe the rules of the road. Don’t allow yuorself to be distracted with sat navs, phones or the stereo. Reduce the risk of an accident and your No Claims Bonus will be safer! Keep up with car maintenance, too. Worn tyres and a murky windscreen can easily lead to avoidable accidents. 

Protect Your No Claims Bonus with Insure Your Motor

We hope this answers all your questions about No Claims Bonus. Remember, you can purchase Protected NCB at the same time as taking out your insurance policy, or at renewal, so get in touch with us today to see how much we can save you?

Click for an online quote or speak to our expert team on 0800 557 1329.

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