Explained: What is a No Claims Discount?
A No Claims Discount (NCD), also known as a No Claims Bonus, is a reduction in premium as a reward for not making any claims on your insurance policy. The longer you go without having to make a claim, the bigger the discount year on year.
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No Claims Discount Explained
A No Claims Discount (NCD), also known as a No Claims Bonus, is a reduction in premium as a reward for not making any claims on your insurance policy. The longer you go without having to make a claim, the bigger the discount year on year.
It's a nice little bit of jargon you hear whenever you look into purchasing a car insurance policy, but what does a No Claims Discount (NCD) or a No Claims Bonus (NCB), actually mean?
In this article we'll aim to explain all things No Claims Discount - how it works, how you can protect it, and what happens to it when you take out short-term insurance cover.
How does a No Claims Discount work?
Each year you go without making a claim, is another year added to your NCD. The exact discount you would be entitled to varies from insurer to insurer, but these can range in discounts from 30% - 70% off your annual premium.
It is not a legal requirement for insurance companies to provide a no claims discount, but most UK insurers do. How different insurers run their no claims schemes can vary quite a bit, so it is important to shop around for the deal that suits you.
Does No Claims Discount expire?
It's a good question!
The great thing is, as long as you stay insured and don't make a claim, your no claims discount should remain in place! You should be able to keep the same number of no claims discount years if you switch providers, but keep in mind that the actual discount applied may differ between insurers.
As long as you're staying insured your no claims discount should be fine, but if you go without insurance for a long period, say for more than two years, you may have to start over or accept a reduced NCD when you take out a new policy. Again though, this is up to the discretion of the insurers.
What happens to my NCD if I end up making a claim?
In the unfortunate event that you do need to make a claim and you are at fault, or where the insurer cannot recover costs from another party, your No Claims Discount may be reduced or lost. If a claim leaves you driving a replacement, see how long you can keep a courtesy car for the time limits involved.
For example: One claim could reduce your No Claims Discount by two years, or multiple claims in a short period may result in the No Claims Discount being reset to zero. Total-loss claims are particularly costly - see car write-off categories explained for what each ABI category means.
However, in the event the claim is due to an accident where the other driver is at fault and their insurer pays for the damages, your No Claims Discount could remain unaffected, but again, this varies between insurance providers.
Can you transfer your No Claims Discount to a new insurer?
Helpfully, most UK based insurers will allow you to transfer your No Claims Bonus if you choose to switch insurance providers. Your new insurance company will often require proof of No Claims Discount, which is typically in the form of a renewal notice or letter from your previous insurer. Some insurers also allow a period of time where your No Claims Discount remains valid, even if you haven't had a car on the roads for a while. It's worth noting that this is very rarely the case if your time without a car is more than two years.
How to protect your No Claims discount
Many insurers now offer optional 'No Claims Discount Protection'. This allows drivers to make a predetermined number of claims without losing their discount. This option of protection typically comes at an additional cost to your premium and does have limitations on the number of claims allowed before the discount is reduced or removed.
Is no claims discount protection worth it?
It depends on how much discount you have to lose. If you have spent five or more years building a large discount, protection can be worth considering - one at-fault claim will not wipe out the saving you have built up.
Two things to weigh before paying for it:
- Protection preserves your discount, not your price. The underlying premium can still rise after a claim - you just keep the percentage discount applied to it.
- The number of protected claims is limited, typically one or two in a set period, and the protection itself adds to your premium.
For drivers with only a year or two of bonus, the add-on cost can outweigh the benefit. For long-standing discounts, it is often a reasonable safeguard.
Does Temporary Car Insurance Affect Your NCD?
No, thankfully it does not. One of the most helpful things about a temporary car insurance policy is that it does not affect your existing No Claims Discount.
If you are borrowing someone else's car and end up needing to make a claim, it will also protect their No Claims Discount as well.
Can I build up my own No Claims Discount as a named driver on someone else's policy?
Usually not. On most UK policies, the no claims discount belongs to the policyholder alone - a named driver's claim-free years earn nothing of their own. Our guide to what a named driver is covers how these arrangements work.
A small number of insurers do offer a separate named driver discount, but it can normally only be used with that same insurer, and it is not transferable when you shop around.
If you want a discount that is genuinely yours, you need your own policy in your own name - that is the only way to build a no claims discount every insurer will recognise.
How to keep your no claims bonus without a car
Sold your car, or taking a break from running one? Your no claims bonus does not vanish overnight, but it does have a shelf life. Most insurers will honour a no claims discount for two years after your last policy ends - a few stretch further, but that is the exception.
Practical steps to protect it while you are without a car:
- Keep your proof. Save the renewal notice or NCD confirmation letter from your last insurer - you will need it to claim the discount later.
- Watch the two-year clock. If you expect to be without a car for longer, ask insurers about their exact limits before yours expires.
- Use temporary car insurance for occasional driving in between. Short-term policies sit separately from your annual history, so a claim on one does not touch the bonus you have banked.
What is the maximum no claims bonus?
Most insurers cap the number of claim-free years that earn additional discount, commonly somewhere between five and nine. Beyond the cap, extra years do not increase the percentage - although a longer record still works in your favour when insurers assess you.
The discount those years buy varies by insurer. There is no industry-standard scale, which is why the same nine-year bonus can be worth different amounts with different providers. When comparing quotes, look at the final premium rather than the headline discount percentage.
So that's your No Claims Discount in a nutshell!
Buying a new car can be a super exciting experience, but sometimes all the legal requirements and insurance jargon can get a bit complicated. Most insurance companies will make sure they have lots helpful information on their websites, so it's important to have a good read over everything before choosing a policy. Always remember to ask questions if it's something you're unsure of, and shop around before you buy to make sure you're getting the best deal for you.
If you've recently bought a new car and need to bridge a gap in your annual coverage, you can get a quote for drive away insurance in minutes online for however long you need it - whether that's for an hour up to 28 days!
Why not read our guide on How to drive an automatic car?
When comparing the total cost of a policy it is also worth understanding Insurance Premium Tax (IPT), the government levy applied to every UK insurance premium.
Frequently asked questions
How long do no claims last after you cancel a policy?
Typically two years. Most UK insurers will accept a no claims discount earned on a policy that ended within the last two years; after that, many reset it or apply a reduced figure. If you are approaching the limit, get quotes before your bonus lapses rather than after.
How does a no claims discount work?
Every year you hold a policy without making an at-fault claim adds a year to your no claims discount. Insurers convert those years into a percentage reduction on your premium at renewal or when you switch. The scale varies between insurers, and most cap the years that count.
Do named drivers get a no claims bonus?
Usually not. Claim-free years as a named driver normally earn nothing you can take elsewhere. A few insurers offer their own named driver discount, but it is typically only usable with them. To build a bonus every insurer recognises, you need a policy in your own name.
Should I protect my no claims discount?
It is worth considering if you have a large discount built over several years, since one at-fault claim could otherwise cost you a chunk of it. Remember that protection keeps the discount, not the price - your underlying premium can still rise after a claim - and the add-on has its own cost.
What is the maximum no claims discount?
There is no universal maximum. Most insurers stop counting additional years somewhere between five and nine, and the discount each year earns differs between providers. Once you reach an insurer's cap, further claim-free years do not increase the percentage discount.
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