What is a no claims bonus?
A no claims bonus (NCB), often referred to as a no claims discount, is a discount which can be applied to the cost of your car insurance. The amount of discount is calculated by reference to the number of years that you have driven a vehicle without making a claim on your car insurance. For example, if you have been driving for four years and have not made a claim on your car insurance during that time, you will have accrued four years’ worth of NCB. The idea behind this is to reward consistently safe driving.
There is no set NCB percentage or value in the UK and the amount of discount offered for each year of NCB depends on your insurer.
Your NCB can usually be transferred between insurers. For example, if you’ve been insured with company A for three years without making a claim, and choose to move to company B for your insurance for the fourth year, you will still benefit from the three years NCB that you accrued during your time with company A. However, you will usually need to provide proof of your NCB to your new insurance provider. You can request this proof from your previous insurer. You can also transfer NCBs between vehicles.
If you make a claim under your car insurance policy, you will usually lose some, or all, of your NCB. However, if you have an accident and are deemed to not be at fault, your NCB will not usually be affected. If both parties are at fault, then usually the NCB of both drivers will be affected.
If you are a named driver on a vehicle (rather than the policyholder) it is unlikely that you will be able to build up your own NCB.
You may have the option to pay extra on your insurance policy to protect your NCB. This means that, even if you make a claim on your car insurance policy, you will keep the NCB that you have accrued to date. However, this does not necessarily mean that your premium will not increase over time. Insurers will usually take account of your claims history when calculating the cost of your insurance. The NCB would then be deducted from the cost at the end.
However, it’s worth bearing in mind that, even if you choose to ‘protect’ your no claims bonus, it might be subject to a ‘step back’ should you have an accident. This essentially means that, instead of protecting all of your years of no claims bonus, your insurer may just ‘step back’ (reduce) the amount, usually by one or two years in line with your insurer’s ‘step back’ scale at the time of renewal.