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Is It Worth Protecting Your No Claims Bonus?

By raccars Published

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Designed to encourage motorists to drive carefully, a no claims discount is applied for each year of an insurance policy completed without making a claim. Most insurers will cap the no claims discount after a certain number of years. However, there is no industry standard for no claims discounts and each insurer follows a slightly different protocol, in terms of how much discount they apply and for how long.

Nonetheless, a no claims discount can result in significant savings on your insurance premium, of up to 50% for example, after three years. Some choose to pay an extra fee, usually something like 5-10% of the total premium cost, to protect this discount, meaning that they can retain it even in the event that a claim is made. However, confusion arises because some drivers who have taken out protection on their no claims discount have claimed that their premium price has risen, even after taking out protection.

The fact is that protecting your no claim discount does not ensure that your premium will not rise after a claim. Insurance premiums are calculated using a number of factors, including your driving history, your age, address, occupation and how you use the car. Your insurer reassesses the level of risk you pose every time you renew your policy, and an accident in your history always marks you out as a riskier prospect. The fee you pay to protect your no claims discount is exactly that - it protects the discount, not the policy itself.

This means that your premium can still rise after a claim because although the discount is still applied, it is based upon a more expensive policy in the first place. However, insurers don't always cancel a full no claims discount in the event of a claim - they may, for example, cancel the last two years of a five year no claims discount. If you are paying £27 per year for your no claims protection, but a policy based upon three instead of five years discount is only £22 more expensive, it is actually costing you more to protect your discount than to lose it after making a claim.

It can be very difficult to work out if it is worth paying extra for protection, but consider getting quotes for a policy including no claims protection and one without, and with a full no claims discount and one for only a couple of years of discount. This will help you to decide if you can afford not to protect your no claims discount.

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