If you make no claims on your car insurance policy during a designated year, then your insurance company will offer you a discount on the following year’s premium when the time comes to renew - this is known as a “No Claims” discount, or “No Claims Bonus”.

What is a No Claims Discount?

You can choose to accept that discount immediately as part of your renewed premium, or you can defer the discount and let it increase incrementally with each year that you make no claim. The longer you drive without making a claim, the bigger the discount will be that your insurer offers you.

Most insurance companies cap their discount offering after five years of no claims, but some companies do offer NCDs that extend beyond five years. No Claims Discounts can offer drivers considerable savings on their premiums. Drivers will often purchase a protected no claims discount to safeguard their NCDs.

How Do I Safeguard My No Claims Discount?

Because no claims discounts can offer substantial savings to drivers, some drivers choose to protect their NCDs in the event that they need to claim. Drivers will often work to build up several years of NCDs, which could be severely reduced or even canceled from one claim incident. To protect their NCDs against this, drivers purchase a “protected no claims discount”.

A PNCD is an additional insurance payment that drivers make on top of their regular car insurance which guarantees that their NCDs remain intact even if they need to make a claim.

What Happens To My NCD if I Claim?

If you’re involved in an accident where you are responsible and need to claim, then this will affect your NCD if you don’t have a “protected no claims discount”. In this case, your discount’s value will either be reduced or canceled entirely, depending on your insurance provider’s policy. The same rule applies to extraneous situations such as car theft or weather-related damage.

If an accident occurs where the other driver is at fault, then your insurance provider will likely recover the claims cost from the other driver’s insurer, and your NCD should remain intact. If the other driver has no insurance then you will lose some of your NCD because your insurer wasn’t able to recover the payout cost.

What Are the Limitations of a Protected No Claims Discount?

Although a protected NCD might seem like a surefire way to ensure your premium discount is guaranteed, it does come with ceilings and limitations.

A no claims discount protection agreement might stipulate that the NCD is protected against only one or two insurance claims in a year. Some insurers may offer to cover more claims, as it the number will vary depending on the insurer and their policy.

Generally, if you make more than one or two claims in a year it will impact your NCD even if you have purchased a protection policy. Always check what your insurance provider’s regulations are for a PNCD before purchasing.

Also, keep in mind that a protected no claims discount doesn’t automatically mean your premiums won’t increase after you’ve made a claim. Your insurer will still use your claims history when calculating your premium, with your no claims discount included after this.

What Happens To My NCD If I Want To Change My Insurers?

If you are planning to change from one insurance provider to another you should be able to transfer your existing no claims discount - as long as you can provide proof of it to your new insurer.

Your insurance company will usually send you a letter or email reminding you to renew your policy shortly before it expires. This letter generally includes your proof of no claims, which you can use as proof to transfer your current NCD value to your new insurer. If you cancel with your current insurer they may also provide proof of your no claims discount in their cancellation letter.

Not all insurance companies provide this information upfront. If your renewal letter or email contains no proof of your existing NCD, then you will need to call or email them to request it.

Remember that different insurers will charge different costs for a protected no claims discount. Your new insurer may charge a lower or higher fee to protect your NCD, so always check what their existing policy conditions are before you decide to switch.

At CompareInsurance you can simplify your search for the best no claims discount protection by accessing and comparing a range of quotes from different insurers.