A guide to No Claim Discount and car insurance

Want to know more about how a No Claim Discount (NCD) works? This guide will tell you all you need to know and how it can help you save on car insurance costs.

What is a No Claim Discount?

If you've no need to claim on your insurance policy, then your price next year may be reduced as a result. This is known as a No Claim Discount.

With every year you have insurance in place in your name without claiming on your policy, your discount will increase. Some insurers, however, will have limits on how many years No Claim Discount they will apply.

Is a No Claim Discount the same as a No Claim Bonus?

Yes, there are a few different terms that get used interchangeably by insurance providers, such as:

• No Claim Discount
• No Claim Bonus
• No Claim Discounts

All refer to the same policy feature. Even when called a bonus, it works in the same way by providing a discount on your insurance costs.

How does a No Claim Discount work?

Every time you renew your car insurance, you should quote the number of years you have held a car insurance policy and not made a claim. This will help you get the best possible quote. You can grow your No Claim Discount until you have to make a claim on your policy. At that point, if your insurer issues a payment, you’re likely to either lose or reduce the discount you’ve built. 

If you’re involved in an incident and another party was at fault, your insurer may be able to reclaim any costs from their insurer. In these cases, your No Claim Discount should be unaffected but this will depend on your insurer.

However, your No Claim Discount may be impacted if:

• Liability for an incident is shared between parties/can’t be agreed
• Your car is stolen
• Your car is damaged by bad weather
• Other circumstances outlined in your terms and conditions

Can I protect my No Claim Discount?

Yes, with some insurers it’s possible to protect your No Claim Discount, even if you were liable for a claim made, or your insurer can’t claim costs back. The decision to protect your No Claim Discount is personal and should take into account the cost of doing so versus the amount of discount at stake.

If you’re wondering why you should consider protecting your No Claim Discount, the below scenario explains how it works:

Example

Imagine your car was damaged whilst you were visiting the supermarket. The driver that caused the incident has left without a note and there is no CCTV to track what happened. In this situation, through no fault of your own, you may have to claim on your insurance to get it repaired.

Without protection, that one claim could result in you losing a substantial No Claim Discount on your premium – a discount that you had built up through years of careful driving.

With protection, you can make your claim whilst keeping your discount in place for the rest of your insurance period. You’ll also be able to keep building your No Claim Discount without starting from scratch again.

How does Protected No Claim Discount work?

Every insurance provider is different so do read your policy carefully. For example, you may be able to add a protected No Claim Discount to your policy as an optional extra, as long as you have earned four or more years No Claim Discount.

The price of your policy is not protected, of course, and can increase following a claim or a range of other factors. What would stay intact is your No Claim Discount.

To learn more about why car insurance costs can rise, see our article here.

How do I prove I have a No Claim Discount or check how many years I have?

When you’re going through the process of getting an insurance quote, you’ll be asked if you have a No Claim Discount and how many years you have accumulated. This is then used to calculate any discount you may be able to access given your insurer’s criteria.

You may be asked to provide the proof or paperwork for this and share it with your new insurer. In most circumstances, if you qualify for a No Claim Discount, you will have a document outlining the details with your renewal invite or cancellation notice from a previous insurer. You may also find your No Claim Discount details in letters or emails from your insurer, outlining policy details. They might also be located in your online account, should you have one.

If you don’t have the confirmation or information you need, simply ask your insurer to send it to you and share it with your new provider.

It's worth being aware that No Claim Discount can have a shelf life. So, if you’ve taken more than two years away from driving or having an active car insurance policy, you may struggle to find an insurer that will honour your past No Claim Discount.

How do I know which insurer has the best No Claim Discount?

Each insurer will have different terms and conditions for No Claim Discount. So, it’s always best to check the details when assessing your insurance options. When shopping around, keep in mind what’s most important to your circumstances.

• Do you have multiple cars or drivers to consider in your household?
• Do you want named drivers to accrue No Claim Discount?
• Were you previously on an ex-partner’s or family member’s policy? Do your years as a named driver count towards No Claim Discount?
• Do you want to protect the No Claim Discount years you already have in place?
• Do you want the best possible price or the chance to grow your No Claim Discount more over time?
• Do you also use your vehicle for work purposes?
• Have you built up your No Claim Discount in another country, and will the insurer accept overseas No Claim Discount?

With your key concerns to hand, you’ll be far better placed to pick a policy that works for you.