What is a no-claims bonus?

Lesson Type
Last updated: 12 Nov 2019

It’s a question you’ll be asked when trying to get insurance quotes, but do you understand how a no claims bonus – also known as a no claims discount – works? It's not something that's typically covered in driving lessons, so in this article we answer any questions you might have about no claims bonuses, explain how to get yours and look at how much it could help you save.

What is a No Claims Bonus?

A no claims bonus is something which a driver is rewarded with for every year they’re on the road without making a claim on their car insurance. A no claims bonus effectively makes you less risky to insurance companies, as the more years you do not make a claim, effectively, the more trustworthy you are on the road.

Therefore, the more years no claims bonus you acquire, the cheaper your insurance premium will be.

New drivers and No Claims Bonus’

Unfortunately, new drivers are unable to take advantage of no claims bonus’ for their first insurance quotes, but you may be able to start building them even if you’re not the main driver on your vehicle.

Certain insurers allow you to build up your no claims bonus whilst a named driver on someone else’s vehicle. This is great for young and newly-qualified drivers as it means that they can start building theirs even if they can’t afford, or don’t need to buy, a car of their own.

One huge benefit of this is that, when a driver comes to take out their first insurance policy as a main driver, they won’t be faced with inflated premiums which many struggle to pay. In fact, Sainsbury’s Bank’s guide to No Claims Discounts draws on statistics from the British Insurance Brokers’ Association (BIBA), saying first year car insurance reductions can be around 30%.

You can find out whether an insurance company offers named driver no claims bonus’ by looking through individual policies or by using a car insurance comparison tool.

How much discount will I get?

How much you’ll save once you’ve built up your no claims bonus depends upon who your insurance is with and how many years of no claims discount you have built up. The number of years no claims bonus you’ll be able to build varies between insurance companies, and the discount applied is not necessarily the same for each year.

BIBA estimate that five years of consecutive no claims driving could save a driver between 60% and 65% on their premium.

How will I receive my no claims discount?

You will not receive your no claims discount in cash form. It will, instead, be applied when it comes to your renewal date.

Your no claims discount does not limit you to using one insurance provider, so you don’t have to stick with the same company to take advantage of it. The number of years no claims discount you have accrued should be stated on your renewal document, and, in many case, you can use this as your proof of no claims for your new insurance provider.

If you’ve built up a few years no claims and then have an accident, you may lose your no claims bonus, unless it’s protected. As Sainsburys guide explains, you could lose your (unprotected) no claims bonus, if:

  • You have an accident which is another driver’s fault. Your discount may be temporarily suspended or reduced, but, if the insurance company recover the costs, you may not lose your no claims bonus.
  • Accidents where no party is to blame. If a claim is made but the blame doesn’t lie with anyone, all parties involved can expect to lose their no claims bonus’.
  • Damage caused by the weather.

How do I protect my no claims bonus?

You may be able to protect your no claims bonus by paying extra on top of your premium. This can be an extra 10% – 15%, so it’s worth weighing up your options before deciding to add protection to your policy.

Visit Sainsbury’s Bank’s Guide to No Claims Discount for more information.