Understanding the No Claims Discount
In short, a No Claims Discount or ‘NCD’ is ‘money off your insurance policy because you’ve proved you’re less of a risk’.
Or in other words, it’s an amount of money that an insurance provider ‘discounts’ a policy – the provider charges less for cover – as recognition that you’ve not made a claim. NCDs are offered on all kinds of insurance policies, but we’re focusing on NCDs in car insurance here.
How do I get a No Claims Discount?
Usually, for every consecutive claim-free year on your policy, you’ll be offered a discount on your insurance premium. The longer you go without a claim, the less of a risk you are to your insurer and the bigger the discount is likely to be.
If you manage five consecutive claim-free years of driving for example, an NCD could mean your policy costs 50% less than someone with your same profile (same age, same area, same car etc.), who’s had an accident recently.
Most insurers only take the first five claim-free years into account, although some do offer more. The discount is usually only applied to the policyholder, and can only be used on one vehicle (if you have two cars your NCD can’t be split between them). Generally, insurers will dock two years’ NCD for a first claim.
What happens if there’s a claim?
If you make a claim on your policy, or someone makes a claim against you, then you’ll lose either your whole NCD or part of it. It depends on the circumstances of the claim, and if your insurance company can recover costs from someone else or not.
It’s not about who’s at fault – it’s simply down to a claim being made. And if an uninsured driver hits you, some insurers will still remove your NCD. What’s important to note here, is that all insurers have different policies on NCD, so it’s worth checking before you buy cover.
How can I protect my No Claims Discount?
Many insurers offer you the chance to protect your NCD by adding a small fee to your premium. Protecting your NCD doesn’t mean your premium won’t go up – you’re paying to protect the discount, not the premium amount.
However, if you’ve protected your NCD and a claim is made, your discount won’t be affected; you can still make some ‘at fault’ claims. We offer that option if you have 3 or more years No Claim Discount but other insurers take a different approach, so do ask before you buy.