No Claims Bonus Explained - What Does It All Mean?
The process of purchasing car insurance is never straightforward. So we thought we would break it down here at The Insurance Factory. Trying to figure out which insurance policy to purchase and what products to cover can lead to head scratching and confusion.. Then you have the complexity of additional extras such as hire car cover, legal protection and more which can make the whole process overwhelming. A question that will often arises is whether it is worth it to pay extra to protect your non claims discount.
According to recent research if you don’t protect your no claims discount your premium might actually increase by 30% if you make a claim. While protecting a five year no claims bonus can add extra money to your annual premiums. If you don’t make any claim then you will end up out of pocket.
A no claims bonus or NCB is essential in this day and age to reduce the premiums of your car insurance, especially with imminent insurance risings being reported in the media at present. The worth of such a bonus can vary from one insurance company to another. An NCB of 5 or more years can for example enable the car owners to receive a 60-75% discount on their car insurance premiums. No claims bonuses are earned.
Usually for every year that car is insured by someone without making any claim to the company will help the owner earn another year’s no claim bonus to a maximum of 5 years. Some companies give even more discounts if the claim free years exceed 5 years but usually the maximum figure that is quoted by most companies is 5 years. If a car owner has insured two cars then he/she would require two lots of NCB. Also worth noting is that you can still earn a no claims bonus on a motor trade insurance policy One for each car insured. It is not possible for drivers to share the NCB that they have earned on one of their cars with the other car of theirs which is insured by the same company and is fact illegal.
When you have a no claim bonus protection, the excellent driving history that you have had maintained will not be lost if you are forced to make a claim or if your car is hit by someone else without giving you their insurance details. If you didn’t have this protection in place then unfortunately you lose your no claims discount and will pay more for the privilege of your car insurance. Your no claim bonus ratings are protected if you make one claim during the duration of your car’s insurance.
The bad news is that a protected NCB does not necessarily prevent your premium from rising every year come renewal time. Thus even though a claim can be made and the NCB can be protected, the premium can still rise. Usually what happens is that most insurance companies utlise the drivers’ claims history during the process of underwriting, which is the process that they go through to calculate the premium for each insurance. Hence, if a claim has been made then it will be included as part of this calculation. With bigger and more structured insurance companies the process can be a little different, as the cost of the claim, also includes the fault as well as the non-fault aspect along with the category of the claim while calculating the premium and this is the reason why they are also part of the questionnaire drivers have to answer when they are trying to obtain a quote.
All these factors can indeed add a “loading” to the premium which may or may not be combated by all the other discounts and loadings that are applicable at that time when the renewal price is being determined. In other words it can become somewhat of a minefield. No Claims Protection is optional but ultimately worth it if you have a considerable amount of no claims bonus that you have built up and the price to pay for the protected no claims is reasonable.