How does a no claims bonus work on car insurance?

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Things to know...
  • Besides comparison shopping, accumulating many years of driving without filing a claim is the most effective way to cut your auto insurance costs
  • You can earn yourself a decent car insurance discount just for bagging about five or more years without filing a claim. This type of discount is referred to as a no claims bonus
  • For each year that passes without you making an auto insurance claim, your auto insurance provider awards you a discount on your car insurance upon renewing your policy
  • In theory, the concept of no claims bonus sounds simple, but in practice, it could be a whole different story
  • The process of claiming your no claims bonus can cause a lot of confusion and distress since each insurance company plays by its own rules

On average, there are over 37,000 car accident fatalities in the US every year. That’s roughly 100 deaths from road crashes per day – most of them, avoidable. As a driver, there’s a lot that you can do to protect yourself and your fellow road users. The most important one is to be a careful driver. On top of that, get adequate car insurance to protect yourself from financial loss in the event of an accident.

When shopping for car insurance products, compare quotes from multiple providers to improve your chances of getting better rates. Comparison shopping will also help you purchase a coverage that best fits your auto insurance needs. If you have the right type of coverage, your auto insurance provider will pay for all or most of the losses you may incur after an accident.

However, car insurance companies are for-profit organizations and will always favor careful drivers. One of the many ways car insurance companies reward careful drivers is through no claims bonuses.

What is a no claim bonus?



Often abbreviated as NCB, a no claim bonus — also referred to as a no claim or a claims-free discount — is a discount earned by a customer with the policy on his/her name for going a long time without making any claims. This discount is aimed at rewarding drivers who have driven for a long time without being involved in an accident.

The idea of using no claim discounts to reward accident-free drivers has been around for quite some time, encouraging motorists to be more careful on the roads and reduce accidents.

The amount by which your rates reduce could vary from one auto insurance provider to the next. But in general, an NCB accumulation of more than five years will earn you a significant discount. Simply put, the longer you drive sans filing a claim with your auto insurer, the greater the reduction in your car insurance rates.

All types of auto insurance policies — liability, PIP, comprehensive and collision, medical payments, etc. — can accumulate NCB.

How It Works

First of all, a no claims bonus only applies for the policyholder — the main driver, and the benefits will not be extended to other named drivers. Your insurer will continually award a bonus every year you hold your auto insurance policy without filing a claim. No NCB will be awarded the following year if a claim is made.

Additionally, if a policy expires and is not renewed within 90 days from the expiry date, NBC is terminated.

After several years of driving incident-free, you can then ask for your accumulated no claim bonus.

Whether it’s referred to as a discount or a bonus, it’s practically the same thing — a reduction in the price of your auto insurance coverage for as a reward for not filing a claim against your policy.

How much is a no claims bonus worth?

No claim bonuses vary among providers — there’s no standard figure. However, no claim discounts based on the same principle paying less through safe driving. Typically, in the first year of your policy, the auto insurance provider will reward with a 30 to 40 percent discount on your policy if you don’t make a claim against your policy.

If you can maintain your claim-free record for the second year, you will be awarded an additional 10 percent discount.

In most cases, you will keep receiving a discount on your premium until you make a claim. The amount will vary among providers. One auto insurance company may reward you with a 30 percent discount on your premium and another the other one 50 percent.

Some auto insurance providers will also cap the number of years you are supposed to receive a no claims discount. Overall, the benefits of a no claims discount may not be as worthwhile as many people perceive them to be.

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No Claims Discounts and Age

The impact of a no claims discount on your premium will only be seen in the first years of your policy, especially for young drivers. You should expect a 50 percent discount on your rates three years down the line. After that, the changes are passable, and eventually, your rates will level out.

The savings tend to dwindle as the years go by. You can still make some decent savings, but not as much as you’d have hoped. If your premiums are still too high, start comparing quotes early and switch to another provider as soon the policy expires.

Can I protect my no claims bonus?

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Traditionally, the only way to protect your no claims bonus is safe driving. Some auto insurance providers allow drivers to make a given number of claims without affecting their bonus via a Protected No Claim Bonus cover. Another option is the Step-back No Claim Bonus cover offered by some providers.

If you have a step-back no claim bonus cover, only a part of your no claims bonus will be affected if you file a claim. For instance, if you file one claim, your no claims bonus will be rolled back three years instead of being reduced to nil.

Car insurance no claims discounts are meant to be a reward for careful drivers. Just like everything else in life, these rewards don’t always go to people who deserve them the most. But there’s no need to worry since there are other ways to reduce your auto insurance costs. For instance, comparing quotes from various providers can help you make considerable savings on your auto insurance policy.

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