Home insurance no-claims discount explained

Most people know they can get a no-claims bonus for their car. But did you know you can build no-claims discount on your home insurance as well?

 

What is home insurance no-claims discount?

A no-claims bonus (NCB) gives you money off next year’s home insurance, as a reward for not claiming on your policy over the previous 12 months. It could be a great way of helping to cut the cost of your cover.

It’s sometimes referred to as a no-claims discount (NCD). We’ll be using the terms interchangeably here.

But how does it work? By not making a claim, the insurer saves on the cost of handling those claims, and passes some of that saving on to you. It also encourages policyholders to think twice about putting in smaller claims.

It could also mean your insurance costs rise at a much slower pace than they would otherwise.

Will my home insurance no claims discount work like my car insurance one?

You might be familiar with no-claims bonuses with your car insurance policy. It works in much the same way for home insurance – for each year you don’t claim, you tend to get an extra discount on the following year’s policy.

There are a few key differences, though:

• Home insurance NCB comes in two flavours – buildings and contents insurance.
• Car insurance companies separate ‘fault’ and ‘non-fault’ claims. Non-fault claims are less likely to impact your car's NCB. Home insurance no-claims bonuses don’t make this distinction.
• Some car insurance companies let named drivers build their own no-claims bonus, or let you get a full year’s worth of NCD in 10 months. Home insurance policies don’t do this.

How much could I save?

The longer you go without claiming on your home insurance, the bigger the discount you could get. Typically you get up to a maximum of 4 or 5 consecutive years’ worth of NCB.

For example, you could get a 30% discount after going 1 year without claiming, rising to as much 70% for 5 years. How much you can save with your no claims bonus depends on the policy and the insurance company you choose.

How do I get a no-claims discount on my home insurance?

The good news is that, on the whole, the easiest way to get a home insurance no-claims bonus is to do nothing.

So long as you have a home insurance policy for a continuous 12-month period – and don’t make any claims – you should get a year’s no-claims bonus.

Depending on your home insurance provider, you could have separate no-claims discounts for your buildings and your contents insurance.

This could be useful for tenants who don’t need buildings insurance but who want to build up a no-claims discount on their contents insurance.

What happens to my discount if I claim on my home insurance?

When you make a claim, you tend to lose a year or so of your no-claims bonus.

As a result many policyholders might decide to 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 those for fire, flood, burglary or a burst pipe. Here, claiming tends to make more sense.

By paying smaller claims yourself, you might be able to keep the cost to a minimum.

Will claiming on my buildings insurance affect my no claims discount on my contents insurance?

Your buildings and contents insurance are often 2 separate policies, even if you buy them from the same insurer. This means that if you claim on your contents insurance it doesn't hurt your NCB on your buildings insurance and vice versa.

Policies vary though, so it's a good idea to check yours to be sure.

Is it worth protecting my no claims discount?

Some home insurance companies let you protect your no-claims discount for an extra fee.

This protection usually allows you to make 1 or 2 claims in a year without impacting your no-claims bonus.

But the cost could eat into the potential savings you gain from your NCB. This means you need to balance out the cost of the protection with the size of the discount and think about whether it is worth the cost. It's a personal decision and depends how worried you are about the risk of needing to claim.

The best way of protecting your no-claims discount is not 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 should 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. By solving small problems today, you can prevent a bigger problem developing later.

Can I transfer my no-claims bonus if I switch home insurance providers?

Most insurance companies accept no-claims discounts that you’ve built up with another insurer.

Because they’re portable, you’re 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.

How can I reduce the chances of making a claim on my home insurance?

The most common types of home insurance claim tend to involve:

• Fire
• Flood and storm damage
• Theft and burglary
• Accidental damage

So, the best way to avoid making a claim is to minimise the risk of any of these things happening.

Avoiding fire damage

• Install smoke detectors throughout your home, and check them regularly
• Get your home’s electrics and wiring checked for safety
• Get a fire blanket or fire extinguisher
• Make sure your house has an adequate fire escape

Avoiding flood and storm damage

• Make sure your guttering and drains are clear
• Check your roof for loose tiles
• Prune or crown your any trees that are close to the house

Avoiding theft and burglary

• Make sure your door locks and windows are locked – even when you’re home
• Install a burglar alarm
• Stash valuable and hard-to-replace items and lock them up
• Be careful who you tell when you go on holiday

Avoiding accidental damage

• Don’t bite off more than you can chew – hire a professional when the need arises
• Keep breakables away out of reach of pets and children
• Keep all liquids far away from anything of value

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