7 things you need to know about your no-claims discount

Drivers that have secured a one year no-claims discount (NCD) typically save £745 or 32% on their car insurance premium, according to research from Compare the Market. 

The comparison website found premiums continue to drop in the second year (23%) and third year (18%) with no claims.

Your NCD can help you save on car insurance, but how much does it help against other things pushing up premiums? 

Also should you pay to protect your discount? And can you take it with you if you want to switch insurers for a better deal?

Here, Which? explains what you need to know to get the most out of your NCD.

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1. Many policies won't protect your NCD from vandalism claims

While you may get to keep your NCD during a claim if another party is found at fault in an incident, this doesn’t apply to every scenario. 

67% of the 61 policies we analysed won't protect your no-claims discount from vandalism claims. This means if your car windows get smashed, and you file a claim with your insurance provider, you could lose your NCD. 

However, around a fifth of the policies we analysed have conditions where you can get your bonus back. Usually, this means getting the vandalism cleared by the police as a 'non-fault' or reclaiming the costs back.

We also found that 64% of policies don't protect you from uninsured drivers - meaning for example, that if you’re involved in a collision with an uninsured driver, you could lose your bonus.

• Find out more: best car insurance companies in the UK 2024

2. Insurers have varying maximum NCDs

Each provider will have a maximum number of years of NCD that you can accrue

This ranges from as little as four years with Saga or Santander, to 20 years with esure.

Likewise, each insurer's no-claims bonus scheme differs in the size of the discounts. Maximum discounts on offer vary considerably – as low as 24%, to as high as 80%. 

• Find out more: best car insurance for no-claims discounts

3. It’s rare to build a NCD as a named driver 

Typically, the NCD is earned by the main policyholder, not additional or named drivers on the policy. 

This means that if you're listed as a named driver on somebody else's insurance and you’re not a main policyholder, you generally won't build up your NCD during that time.

However, it’s worth looking into, as a few companies will allow named drivers to earn their own NCD. 13% of 317 comprehensive car insurance policies allowed a named driver to earn an NCD, according to Defaqto.

4. NCD protection may not always be worth it

A report from cosumer intellience agency Mintel from November 2022 found that 70% of car insurance policyholders believed it was worth paying extra to protect their NCD - but is it always worth getting? 

No-claims bonus protection is like an extra safety net you can add to your insurance. It's meant to keep a few claims – usually two or three over three years – from affecting how much you save with your no-claims bonus.

Getting this protection can save you money if you ever have to make a claim. But it does cost extra, typically around £60. Whether it's worth it depends on how much of a discount you'd lose by making a claim.

Finding out this information isn't always straightforward - but insurers have to disclose how much discount their customers usually get for each year without a claim. This can help you decide if it's worth paying for NCD protection.

Generally, the bigger your NCD, the more you have to lose if you make a claim. So, having protection can be more valuable if you've built up a big discount over time.

Also remember, NCD protection won't stop your premium from increasing after you've made a claim.

5. A big NCD doesn't always mean the best price

The longer you go without making claims, the more you build up your NCD - over time, this bonus could typically amount to 60%. 

Compare the Market found having a ten-year no-claims discount can average savings of £1,772, compared to not having one.

However, a big NCD doesn’t always mean you’re getting the best price.

That's because your premiums can still increase even with a good NCD. External factors like repair costs and crime rates in your area can influence your base premium, regardless of your NCD level.

For example, compare the Market found drivers that have secured a one year no-claims discount (NCD) typically save £745 or 32% on their car insurance premium. However, car insurance premiums have increased by £546 (54%) year-on-year for drivers with one year of no claims, which will offset the discount.

6. You can take your NCD with you

If your premium is high you mightbe able to switch to a different insurer for a better deal.

A NCD isn't a loyalty scheme - you can usually transfer it to another insurance company by providing proof in writing. 

So you may be able to save by switching insurers and making your good driving history count for more savings.

Having a 50% NCD on a £1,000 premium is more economical than having a 50% NCD on a £1,200 premium.

7. Your NCD might not survive a break from driving 

Taking a break from driving could jeopardise your NCD. If you remain uninsured for an extended period, you risk losing it. 

Typically, if you go without insurance for more than two years and then start driving again, you may need to rebuild your NCD from scratch or with fewer years.

If you find yourself needing to take a break from driving, speak to your insurer directly to understand their specific terms. 

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