What is a Car Insurance No Claims Bonus?
How to Reduce Premiums Through Discounts and Bonuses
Jun 21, 2009
For each year that a car owner/driver has insurance and does not claim for accidents, certain companies will reward the driver by offering large discounts to continue their insurance. This is because one is seen as a responsible driver with a good history.
When changing insurance providers, the new car insurance company will ask for proof of one's no claims bonus either by requesting a letter from the current car insurance company or by requesting a renewal notice.
No claims bonuses (NCB) are earned by not claiming, for a maximum of five years although some companies offer further discounts for 6 – 8 years of claims free driving. No claims bonuses cannot be shared, that means if a car driver has two cars, separate no claims bonuses will need to be earned on each car insured.
Can a No Claims Bonus be Protected?
- If a car accident happens and the damage to the car is not extensive, it may be worth paying out of pocket for the repairs to protect the no claims bonus. It is advisable to get a repairs quote and then weigh up the costs of repairs versus losing the bonus and paying increased premiums.
- Car owners/drivers can pay to protect a no claims bonus. This ensures that if they have an accident, the no claims bonus remains intact. However, if there is another accident soon afterward, it is unlikely that the bonus can be protected again immediately.
- Claims are divided into two groups, a fault claim and a not fault claim. If the fault is not the driver's fault, his/her no claims bonus should not be affected.
How are Car Insurance Premiums Calculated?
Most insurance companies have upwards of 25 questions that they ask drivers to complete when applying for car insurance, such as gender, age, type of car, previous insurance etc. The answers are used to calculate the premium.
With nearly all companies the no claims bonus discount is applied during the calculation, and not at the end. These calculations depend largely on the insurance company and the way they underwrite the policies, taking into account loadings, discounts and information submitted by the insured.
Ways to Reduce the Cost of Car Insurance
- Some companies offer accelerated policies where drivers can earn a bonus in 10 months rather than 12 - shop around and ask for quotes.
- If a car is already insured with an insurance company and there is a second car that needs to be insured, then many companies will give an introductory bonus for the second car.
- If the person insured has been driving a company car, some companies will recognise that as a NCB if they can prove they have been claim-free in the company car.
- If a person has been a named driver for a number of years (such as a spouse) and then gets a policy in his or her own name, some companies will offer an introductory bonus.
- With some policies, increasing the excess (the amount you pay towards each claim made) will bring a discount to the policy cost. However, in the event of a claim the excess will have to be paid upfront.
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