We use cookies to allow us and selected partners to improve your experience and our advertising. By continuing to browse you consent to our use of cookies as per our policy which also explains how to change your preferences.

Car insurance no-claims bonuses explained

All you need to know about your car insurance no-claims bonus or no-claims discount - from how they work to whether it's worth paying out to protect it.

In this article
What is a 'no-claims' bonus or discount? What’s the maximum no-claims bonus I can get? What is a no-claims bonus worth? How can a claim affect my no-claims bonus? What claims don't affect my no-claims bonus?
Should I protect my no-claims bonus? How does no-claims bonus protection work? Can I transfer my no-claims bonus to a new policy? Do I need proof of my no-claims bonus?

What is a 'no-claims' bonus or discount?

A no-claims bonus - also known as a no-claims discount - is a percentage discount your insurer shaves off your insurance premium to reward you for not having made a car insurance claim in the previous year.

So if, for example, you had a no-claims bonus of 30%, you’d pay £700 where you would otherwise have paid £1,000.

For each consecutive year that you don’t make any claims, the discount increases. So where your insurer might award you 30% for one year without claims, five claims-free years under your belt might net you 60%.  

 

What’s the maximum no-claims bonus I can get?

As you build up more claims-free years, you progress along a no-claims bonus scale, which might look something like the example below.

Eventually, you’ll reach the number of claims-free years required to net the maximum discount your insurer will offer.

Number of years
with no claims
Possible discount
on your premiums
1 year 30%
2 years 35%
3 years 40%
4 years 50%
5 years 60%
6 years 70%
7 years 72%
8 years 73%
9 years 75%

Each insurer's no-claims bonus scheme is different - from the size of discounts to the number of claims-free years it takes to achieve them.

Maximum discounts range from around 40% to 80%, while the number of claims free-years you need before you’re at the top of the scale ranges from around five to 15 years.

What is a no-claims bonus worth?

By itself, a no-claims bonus doesn’t really tell you much about what you’ll pay - you need to know what the premium is to work out how much of a saving it represents.

Suppose you have two insurers. Both have a base premium of £1,000, to which the discount is applied. With insurer A, your no-claims bonus is 75%, and with Insurer B, 60%. In this case, insurer A is clearly the cheapest.

But where the base premiums are different - as they’re likely to be in the real world - then the comparison changes. If insurer A’s base premium is £1,500 and Insurer B’s, £900, for instance - then Insurer B is cheaper.

  Insurer A Insurer B
No-claims discount 75% 60%
Base premium £1,000 £1,000
Premium with discount £250 £400
Base premium £1,500 £900
Premium with discount £375 £360

Some insurers will make a point of awarding generous no-claims bonuses in their marketing, but it's important to compare the final quote - with any discounts included - to determine which is the best deal. 

The reason it’s worth keeping your no-claims bonus in mind is that you can lose it if you make a claim, meaning you'll pay higher premiums than you otherwise would have. 

How can a claim affect my no-claims bonus?

If you make a car insurance claim, you may lose some of your no-claims bonus according to where you are on the insurer’s ‘step-back’ scale.

This basically bumps down the discount back to what it was in previous years. Insurers have different step-back scales. 

In the example below, the driver has spent five years building their no-claims bonus up to 60%.

When they make a claim, that five-year discount reduces to a three-year discount - so at renewal they only get 40% off, and have to spend two years building their no-claims bonus back to what it was.

What claims don't affect my no-claims bonus?

There are certain kinds of claim that won't erode your no-claims bonus. Generally, insurers will leave your no-claims bonus alone if your claim was not a 'fault' claim.

This means they were able to recover their repair costs in full from the party at fault. Similarly, many insurers will disregard non-fault claims where the other driver was uninsured.

It's also quite common for insurers to make exceptions with glass damage claims.

Should I protect my no-claims bonus?

No-claims bonus protection is an added extra that you can buy with your insurance.

It will prevent a limited number of claims (two or three claims over a three-year period is common) from having an impact on your no-claims bonus.

No-claims bonus protection will certainly save you money if you make a claim. However, you'll need to pay extra for it (around £60 is fairly typical), so its value depends on how much discount you’d stand to lose by claiming.

Insurers don’t make this easy to find out - but they do have to show how much discount, on average, their customers were awarded for each year of no claims.

So this should give you a starting point in working out whether to buy no-claims bonus protection.

As a general rule of thumb, the bigger your no-claims bonus, the more you stand to lose through making a claim, and therefore the greater the value of the protection.

How does no-claims bonus protection work?

A fairly common misconception about bonus protection is that it stops your premiums from rising because of a claim.

Unfortunately, this isn’t true. If you make a claim and, as a result, the insurer thinks you’re more likely to make future claims, it will increase your premium. After this, it will apply whatever discount you have.

So, suppose your discount is 60%, you’re paying £400 instead of the base premium of £1,000. Then you make a claim - protected under the added extra you've paid for.

The following renewal your insurer could then increase that base premium to £1,300. With the same 60% discount in place, you’d now be paying £520.

Which? collects data on no-claims bonus protection. The table below shows the policies of dozens of insurers we rate. 

Car insurer Number of claims you
can make with a
protected no-claims discount
AA 2 claims in 3 years
Admiral 2 claims in 3 years
Age UK 2 claims in 3 years
Aviva 1 claim in 1 year
AXA 2 claims in 3 years
Bank of Scotland 2 claims in 3 years
Churchill 2 claims in 3 years
Co-op 2 claims in 3 years
Diamond 2 claims in 3 years
Direct Line 2 claims in 3 years
Elephant 2 claims in 3 years
Esure Unlimited
Halifax 2 claims in 3 years
Hastings Direct 2 claims in 3 years
John Lewis 2 claims in 3 years
Lloyds 2 claims in 3 years
LV Unlimited
Marks & Spencer 2 claims in 3 years
More Than Unlimited
NFU 2 claims in 5 years
Privilege 2 claims in 3 years
Quote Me Happy 2 claims in 3 years
RAC 2 claims in 3 years
Rias 2 claims in 3 years
Saga 2 claims in 3 years
Sainsbury's 2 claims in 3 years
Sheilas' Wheels Unlimited
Swiftcover 2 claims in 3 years
Swinton 2 claims in 5 years
Tesco 2 claims in 3 years
Toyota 2 claims in 3 years
Volvo 1 claim in 1 year
Zurich 2 claims in 5 years

Can I transfer my no-claims bonus to a new policy?

Yes. When you apply for car insurance, the insurer will ask and check how much no-claims bonus you’re entitled to.

In some cases, you’ll be asked to supply evidence from your previous insurer to back this up. This allows you to carry over the benefits of your accumulated claims record without having to start from scratch each time you switch insurer.

You’ll not always see perfect continuity, though - as insurers each have their own no-claims bonus schemes and will apply their own rules.

For example, some insurers may not recognise no-claims bonus you’ve accrued as a named driver on someone else’s policy, and if you’ve not been insured for a few years, the old no-claims bonus will lapse.

Do I need proof of my no-claims bonus?

In many cases, you won’t be asked for proof of your no-claims bonus, but you should always assume that you will and have it in order. Insurers will often check online databases first to corroborate your no-claims bonus entitlement stated in your application.

Your no-claims bonus should also be stated in your paperwork from the insurer you’re leaving.

Where this isn’t available, you can write to your insurer and ask them to supply you with a letter detailing your number of claim-free years.

×