Car insurance no-claims bonus explained
A no-claims discount can shave a significant amount off your premium. Find out more about how they work, and how to build yours here.
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What is a no-claims bonus?
A no-claims bonus (NCB), or no-claims discount, is the number of years that you haven’t claimed on your car insurance policy.
An NCB of five years or more can give you a significant discount on your premium. But this varies between insurers.
How do I build my NCB?
For every year you’re insured without making a claim, you’ll earn another year's NCB.
Some companies offer accelerated policies where you can earn a bonus in 10 months rather than 12.
You can build up an unlimited number of NCBs, but most insurers will only use a maximum of five years when working out a discount.
If I make a claim, how is my NCB affected?
If you make a claim on your policy where your insurer pays out, you’ll generally lose some, or all, of your no-claims bonus.
But if you’re hit by another car and you weren’t at fault, your insurer may be able to reclaim the payout from the other car’s insurer. This will leave your NCB intact.
In cases where fault can’t be agreed on, insurers may split the cost of the claims. In this case, both drivers’ NCB could be affected. This includes if your car is stolen or damaged by bad weather.
If you pay for a new policy with a reduced NCB and are later found not at fault, you can usually get your NCB reinstated. They'll also refund the extra money you paid on your premium.
READ MORE: When to make a claim on your car insurance
How can I get proof of NCB?
When you change your insurer, you’ll need proof of your NCB.
Your existing insurance provider may include your proof of no claims in the letter they send you before your car insurance is due for renewal – so you may want to hang on to this even if you decide to switch.
When you switch, you may also receive proof of your NCB in the cancelation letter you’ll get from your previous insurer.
However, other insurers may not include it anywhere at all, so in this instance you’ll have to request it by phone, post, or by completing a form on their site.
What is a protected no-claims bonus?
Protecting your NCB allows you to have a certain amount of “at fault” accidents without affecting the bonus.
So if you have an accident, the NCB remains intact even if your insurer can’t claim their costs back. Each insurance company has different rules regarding how many claims are allowed.
This won’t necessarily stop your premiums going up after a claim though. Insurers use your claims history to calculate premiums, so a claim will show up even with your NCB protected.
Any remaining NCB you have after a claim may lower your new premium, but there’s no guarantee that it’ll be lower than the previous year.
READ MORE: Car insurance jargon buster
What happens when I change my car or policy? Can I use my bonus on two cars?
No claims bonuses can usually be transferred to another car, but if you switch insurers before the year is up, you won’t get the NCB for that year.
You can't use your no-claims bonus on more than one car.
Insurers should provide proof of your bonus at the end of your policy term. You can pass this on to your next provider when you switch.
Some insurers may provide your proof of no claims in the car insurance renewal letter they send you. If it's not there, you can call your insurer and ask them to send it.
If you cancel your policy, you have two years to reuse your NCB, otherwise it expires and you start from scratch.
READ MORE: How to change your car insurance policy
Can named drivers build up NCB?
Named drivers aren't usually allowed to build up their own NCB. It's based on the main driver's claim-free history.
If insurers let named drivers build up an NCB, it could leave the system open to abuse. For example, you could build up a no-claims discount without ever getting behind the wheel.
There are some insurers that offer NCB for named drivers, but they can’t guarantee this will be recognised by other insurers. It's becoming more common though.
Does NCB apply to work vehicles?
Commercial insurance policies don’t typically let you build up an NCB.
But some insurers might take your commercial or business driving experience into account when calculating your premium.
If your car is insured for you to use for "social, domestic and pleasure" purposes, as well as with work, then it’s likely you can build an NCB. Always check though, as each insurer is different.
How to transfer your company car NCB
If you’ve recently given up your company vehicle, you should be able to use any NCB built up on that car.
But the NCB is only likely to be transferable if you were named on your company’s insurance policy for a particular car and for your use only.
Usually, when changing insurers, you need proof of any NCB you’ve built up from your last provider. But with company policies, many insurers will settle for confirmation from your employer.
Can I transfer NCB from overseas?
It's worth asking, but most UK insurers don’t transfer an overseas NCB to a UK car insurance policy. This is because there are different driving laws abroad, and there's extra administration.
READ MORE: Imported car insurance