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.
What is a no-claims bonus? | How do I build my NCB? | If I make a claim, how is my NCB affected? | How can I get proof of NCB? | Should I protect my NCB? | What happens when I change my car or policy? | Can named drivers build up NCB? | Does NCB apply to work vehicles? | How to transfer your company car NCB | Can I transfer NCB from overseas?
What is a no-claims bonus?
A no-claims bonus (NCB), or no-claims discount, is a count of the number of years in which you haven’t made a claim on your car insurance policy.
The amount that its worth varies from insurer to insurer, but a NCB of five years or more, for example, is likely to give you a significant discount on your premium.
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 NCB, but most insurers will only use a maximum of five years when working out a discount.
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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 it’s agreed that you weren’t at fault, your insurer may be able to reclaim the payout from the other car’s insurer and your NCB may not be affected.
In cases where fault can’t be agreed on, insurers may split the cost of the claims and 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 and a refund on the extra premium you paid.
How can I get proof of NCB?
When you decide to change your insurer, you’ll need proof of your NCB in order to transfer it over to the new one.
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.
READ MORE: How to cancel your car insurance policy
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, as insurers use your claims history to calculate premiums, with your NCB discount calculated at the end.
Any remaining NCB you have after the claim may lower your new premium, but there’s no guarantee that it’ll be lower than the previous year.
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.
Can named drivers build up NCB?
Named drivers aren’t usually allowed to build up their own NCB, as it’s the main driver’s good driving record that the claim-free history will be supporting.
Letting named drivers earn their own NCB could leave the system open to abuse, as 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. This is, however, becoming more common.
Does NCB apply to work vehicles?
Commercial policies and fleet vehicles don’t typically let you build up NCB, but some insurers will take your experience driving a company car 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 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 allow NCB built overseas to be transferred to a UK car insurance policy due to different driving laws and the administration involved.
READ MORE: Imported car insurance
First published 01 April 2016