What is a no claims bonus? Is it worth protecting?

At a glance

• A no claims bonus is a discount your insurer offers for each year you don’t make a claim.
• It can amount to a hefty saving, which can be lost if you then made a claim.
• Protecting your no claims bonus can be a way of keeping your discount even if you make a claim, but it’ll cost more in premiums.

Every year that you don’t make a claim on your insurance policy, you build up a no claims bonus (otherwise known as a no claims discount).

It’s available on a range of insurance products including car and home insurance, and is essentially a reward for not claiming, which comes in the form of a discount on your premiums. If you then needed to make a claim, you’d lose some or all of that discount when you next renewed, unless you paid to protect it. But is it really worth protecting? This guide takes you through the options.

How does a no claims bonus work?

If you don’t make a claim on your insurance policy, you’re essentially costing your provider less as they don’t need to pay anything out – and they’ll reward you for that in the form of cheaper premiums.

Some providers will increase the saving the longer you go without a claim, which means you have the potential to build up a hefty discount over the years (though some insurers may place a cap on the maximum level of discount you can achieve).

How to prove your no claims discount

In order to prove your no claims discount you’ll need proof of your claims history. This can normally be found on the documents in your insurance renewal or cancellation notice, or in your online account if applicable.

If you can’t find it, you can request the information from your insurer. They’ll send it through to you in writing as proof of your discount, which you can send to your new insurer if you’re considering switching provider.

What is no claims discount protection?

If you needed to make a claim on your insurance, your no claims bonus would be lost – or at least heavily reduced – unless you opted for no claims discount protection. This is a type of add-on that allows you to make a certain number of claims per year without it affecting your no claims bonus, though there may still be restrictions involved (there’ll likely be a limit to the number of claims you can make, for example, and it may be limited to claims where you weren’t at fault).

Make sure to check how much of your no claims bonus will be protected in the event of a claim, as each insurer will have different terms. Bear in mind too that it doesn’t necessarily mean that your premiums won’t rise – your premiums will likely still increase following the claim, but you’ll still receive some form of discount, and your no claims history will remain intact.

Is it worth protecting your no claims bonus?

This is an entirely personal decision. You’ll need to consider the extra costs involved, as paying for this kind of protection will add to your premiums. Yet many people find it worthwhile as it gives them peace of mind that years of building up their discount won’t be completely wasted in the event of a claim, particularly in cases where it wasn’t their fault.

What is the maximum no claims bonus?

This will vary between insurers. Some have a maximum percentage that they’ll offer as a discount – which can be as high as 70% in some cases – while others set a maximum number of years that they’ll include in the calculation, with nine years often being the maximum.

Make sure to check the policy document thoroughly so you know exactly what you’re getting, which becomes even more important when you’re switching provider.

How long does a no claims bonus last?

In most cases, your no claims bonus will last for as long as you remain insured and claim-free, even if you switch providers. However, make sure to check the terms of your new insurance deal, as the discount offered for each year of no claims may be different, and the provider may impose different maximums as well.

How to keep a no claims bonus without a car

If you don’t have a car for a while, you may be able to keep your no claims bonus, but only for a limited period.

You can typically be uninsured for a maximum of two years before your no claims bonus expires, at which point you’ll either need to start building up the discount from scratch, or at the very least will start again with a lower discount, depending on the provider.

What happens to your no claims bonus after an accident?

If you have an accident and need to make a claim, your no claims bonus will be reduced, but hopefully you won’t lose it completely. It will typically be reduced by two or three years per claim, depending on the provider, and the more claims you make the more it will reduce by.

Do you lose your no claims bonus if it’s not your fault?

If you’re involved in a car accident which wasn’t your fault, you may still be able to keep your no claims bonus, provided your insurer can recover the costs from the other party. This can also apply in situations where the other driver was uninsured, or in the case of things like windscreen repair or lost keys. However, always make sure to check the policy document as different providers have different rules.