What Is No-Claims Discount And How Does It Work?

Driving

4 min read

If you're looking for cheaper car insurance or trying to find out how to reduce the cost of your insurance, arguably the most sure-fire way of doing so is by building up your no-claims bonus.

What is a no-claims discount?

A no-claims bonus, often called a no-claims discount, is essentially a discount that insurers will give you for each year that you don't make a claim on your car insurance policy.

The idea is that the longer you go without making a claim on your insurance, the better driver you are statistically and you're therefore less likely to have to make a claim in the future.

As a reward, your insurance provider will knock a little off your premium. Exactly how much this is worth varies between insurers, but with a no-claims bonus of five years or more you can end up getting pretty significant discounts on the cost of your car insurance.

How do I get a no-claims bonus?

For every year you're insured and don't make any claims, you'll earn a years no-claims bonus. If you've only started driving or don't have a no-claims bonus history and you want to get it built up quickly, some insurers will offer 'accelerated' policies where you can earn a full years no-claims bonus in 10 months rather than the standard 12.

You can build up an unlimited number of no-claims bonuses, but most insurers will stop offering you extra discount when you've got up to five years' worth. That means that whether you have five years' no claims or 45 years, your premium likely won't be any different.

How does making a claim affect no-claims discount?

Generally speaking, your no-claims bonus will only be affected in incidents where you're deemed at fault. If you have to make a claim, you'll generally lose your no-claims discount.

Many insurance providers offer you the option of no-claims bonus protection. This won't protect all of your no claims bonus, but usually acts to shield you - instead of losing five years' worth of no-claims bonus, you might only lose two.

No-claims protection is a one-off payment that's added on to the price of your insurance premium up-front. This may put some people off, but the price is not as high as it would be if you lost your no-claims discount altogether!

However, it's worth noting that protecting your no-claims bonus won't automatically stop your premium from increasing in future years. 

Do I lose no-claims bonus if I'm hit by an uninsured driver?

In some cases, unfortunately yes. If you're hit by an uninsured driver, you could potentially lose your no-claims bonus if you need to make a claim as your insurer won't be able to recoup the costs from the other driver's insurance company.

This is one of the reasons why insurance premiums have got so expensive in recent years. An increase in the number of uninsured drivers on the roads has resulted in insurance becoming more expensive for everyone else.

Some insurance providers will offer protection against getting hit by uninsured drivers, however it depends on the exact policy you have and so it's always worth double-checking with your insurer.

Do I lose no-claims if I wasn't at fault?

If you're hit by another insured driver and it's agreed that it wasn't your fault, your insurance provider will usually be able to claim the payout from the other person's insurance company and therefore your no-claims discount won't be affected.

In cases where fault can't be determined or agreed upon, your insurance provider might decide to split the cost. Both drivers' no-claims bonuses could therefore be affected, and the same thing can happen if your car has been stolen or damaged by bad weather.

However, if your no-claims bonus is lost and you pay for a new insurance policy but are later found not at fault for the previous accident, you can usually get your no-claims bonus restored and you'll receive a refund for the extra amount you paid for your insurance.

How do I get proof of my no-claims?

Most insurance providers will give you proof in the form of an email or letter, so it's important to hang on to any correspondence from your previous insurers instead of just deleting it or throwing it in the bin.

Can I build no-claims discount as a named driver?

Usually not. Named drivers typically aren't allowed to build no-claims bonuses to prevent drivers from building up years of no-claims discount without ever actually getting behind the wheel.

That said, there are some insurance providers who will offer no-claims bonuses for named drivers, but they can't guarantee that this will be recognised by other insurers. The only real guaranteed way to build a no-claims bonus is on a policy in your own name.

Can I use no-claims on more than one car?

You can usually transfer no-claims discount from one car to another, but you can't use the same no-claims bonus for more than one car.

That means that if you have more than one car you'll need to build separate no-claims bonuses for each vehicle.

How long does no-claims discount last for?

If you're continually insured on a vehicle and don't make any claims, your no-claims discount can potentially last as long as you do. It's not uncommon to see drivers with 40 or 50 years' worth of no-claims discount, or even more!

If you cancel your insurance, your no-claims bonus will last for two years. If you don't get insurance again within that period it expires and you'll have to start all over again from scratch.

Can I transfer no-claims discount from another country?

If you've lived abroad for a few years or if you've recently moved to the UK, you might be keen to know if you can transfer no-claims discount from a car in another country.

Unfortunately, most insurers won't allow no-claims bonuses built up in other countries to be transferred to a car insurance policy here. Some may, however, and it's always worth asking in any case.