Most people know they can save hundreds of pounds a year on their motor insurance by building up a no-claims discount, and motorists guard their own discounts jealously. But did you know you can build a no-claims discount on your home insurance policy as well?
You should do, because this can slash your premiums in exactly the same way. A no-claims discount gives you money off next year’s household insurance premiums, as a reward for not claiming on your policy over the previous 12 months. It’s a great way of cutting the cost of cover.
Demon discounts
Insurers offer customers a discount to deter them from making small or frivolous claims. This saves the insurer the cost of handling and paying those claims, and they pass the savings onto their customers. So it is in your interests to build up a no-claims discount, because you save money as well.
The longer you go without claiming, the bigger the discount you will get, typically up to a maximum of four or five consecutive years. You might get a 30 per cent discount after going one year without claiming, rising to as much 70 per cent. It depends on the policy.
This doesn’t mean your premiums will actually fall by 30 per cent or more, insurers will no doubt find other excuses to bump up your premiums at renewal, so you need to keep shopping around for the best deal every year. But it should mean your premiums will rise at a much slower pace than they would otherwise have done.
Can’t claim, won’t claim?
The problem with building up a no-claims discount is that it makes you reluctant to claim on the policy (which is exactly what the insurer wants). Many people therefore meet the cost of smaller claims from their own pocket. This may seem rather daft - what’s the point of having insurance if you end up paying any claims yourself?
The point is that the policy is still there to meet the cost of expensive claims, such as fire or flood, burglary or a burst pipe (which you should definitely claim for). By paying smaller claims yourself, you can keep the cost to a minimum. In the longer run, it should save you money.
Love it or lose it
Once you have built up a no-claims discount, you won’t want to lose it. Most insurance policies allow you to protect your existing discount, so that you retain it even after making one or two claims. It is typically called a specialist or protected no-claims discount, and you can buy one in return for a slightly higher premium. Terms vary, so read your insurance policy small print carefully, to find out how many claims you can make before you lose your protected no-claims discount.
Say no to claims
The best way of protecting your no-claims discount is to avoid having to make a claim on your home insurance policy in the first place. That means doing your best to deter thieves and prevent damage and accidents. You can reduce the risk of a break-in, by installing solid window and door locks, and even a burglar alarm system. You should also keep your property maintenance up-to-date, because by solving small problems today, you can prevent a bigger problem developing later.
No no-claims, no gain
Most insurance companies will accept no-claims discounts that you have built up with another insurer. Because they are portable, you are still free to save money by shopping around for cheaper cover at renewal. When comparing online quotes, make sure you input your existing no-claims discount.
