No-claims discount explained

A no-claims discount is something you’ve likely heard about, but do you know how it can affect your car insurance? Find out how a no-claims discount works, and why you might want one.

If you have car insurance, you can be eligible for a no-claims discount for every year that you don’t make a claim on your policy. It’s sometimes known as a no-claims bonus and can drive down your premium further for each year you don’t claim, usually up to a maximum of 5 years.

Some insurers may also offer no-claims discounts for periods of less than a year – it will vary from policy to policy. You may also be able to keep your discount when you make certain claims, but this depends on your insurer and the policy type you have, so it’s worth checking with your insurer.

The longer you go without making a claim, the less risk the insurance company feels they are taking on your policy, and so the larger the discount. Every type of insurance policy (third party only, third party fire and theft, and fully comprehensive) can accumulate a no-claims discount.

Brand new drivers setting up a policy for the first time will start with zero no-claims discount, but, according to the Association of British Insurers, even a year’s worth can lead to savings of up to 30%. Some insurers may offer drivers who have zero years no-claims discount an accelerated bonus scheme. As an example, schemes like this could award one year’s no-claims discount after 10 months of driving, provided there are no claims made.

If you need to make a claim after an accident or theft and your insurer has to pay out, you might lose some or all of your no-claims discount. This may apply whether the accident was your fault or not, or if it’s unclear whose fault it was. You can also lose your no-claims discount if your car is stolen.

You may be able to keep your no-claims discount if you can prove a collision isn’t your fault, and your insurance provider can secure payment from the other driver’s insurer. Alternatively, your insurer may offer additional cover that could keep your no-claims discount intact if you were to make a claim for an accident that isn’t your fault and the driver of the other vehicle isn’t insured.

By paying a fee to your insurance provider, you may be able to keep and protect your full no-claims discount, even if a claim has been made. This is what’s known as a protected no-claims bonus. It’s worth checking with your insurer if your discount is protected against all types of claims, or only specific claims.

It's likely that the fee will be less than the discount you’ve accrued over time, although this may vary depending on your policy. There may also be limits on how often the protection can be used, and you may still lose your no-claims discount if you claim two or more times in a year.

Paying for no-claims protection does not prevent the price of the policy from increasing later on.

When a no-claims discount is calculated, insurers will typically only look at the policyholder’s driving history and how long they’ve gone without making an insurance claim.

In the case of multi-car insurance, a no-claims discount can be useful if a named driver on your cover eventually wants to buy their own car, as they can use their no-claims status for their own insurance. However, this usually only applies if they use the same insurance company.

Bear in mind though, that if a policy lists any named drivers and they have an accident, this can affect the no-claims discount of the policyholder.

When an insurance policy is due for renewal or has expired, proof of a no-claims discount will be available from the provider, to be considered by a different company if necessary. Some insurers will only accept a no-claims accumulated within the UK, but it’s worth asking about this.

Typically, only one no-claims discount may be used per policy as the discount is earned on the insured vehicle at the time, meaning it wouldn’t be possible to use a single discount and apply it to multiple cars.

If you own more than one vehicle, each vehicle will earn its own no-claims discount. If you’re looking to insure more than one car through the same insurer, however, they may consider an introductory discount if you only have one set of no-claims discount.

Bear in mind that no-claims discount terms and conditions may vary from insurer to insurer, so if you’re in any doubt, ask your insurer about anything you’d like to know about your specific policy.

The content on this page aims to offer an informative introduction to the subject matter but does not constitute expert financial advice specific to your own situation. All facts and figures were correct at time of publication and were compiled using a range of sources.