Money saving techniques: understanding no claims discounts

Everyone wants to save money on their car and caravan insurance, and one obvious way to do it is through building a no claims discount. But what are no claims discounts and how can they benefit you? Here’s the essential information you need to know about no claims discounts and how they can work to save you money.

What are no claims discounts and what insurance policies have them?

A no claims discount (NCD), also known as a no claims bonus, is a reduction in the amount you pay for your insurance. It’s calculated by the amount of time you have gone without making any insurance claims — specifically claims that are settled against you (fault claims). Claims that are settled in your favour are regarded as non-fault claims and will not affect your NCD. NCDs are cumulatively built up year on year.

You can build up an NCD with an insurance policy for a car, motorcycle or a motorhome (whether you choose third party, third party fire and theft or fully comprehensive). Additionally, you can also get NCDs on policies for caravans and boats.

How do you build up an NCD?

An NCD is applied on a cumulative basis, so every year you do not have a fault claim will lead to an increase in your NCD. For cars, an indicative saving is 30% for one year’s NCD, and there is an additional saving of ten percent every subsequent year. Most insurers will cap the maximum amount of NCD an individual can earn on a single policy.

What if you make a claim?

Sometimes, of course, you have no choice but to make a claim on your insurance policy. You might be reluctant to do so, fearing that you could lose your NCD.

Insurers understand policyholders worry about this and therefore many providers allow you to keep your NCD under certain circumstances. For example, if an accident isn’t your fault, and the insurer recovers all costs from the party that is at fault, you could keep your discount.

You should also be able to keep your NCD if payments are made by your insurer for emergency medical treatment, as well as for glass-related claims. You can therefore replace your cracked windscreen, for example, without having to worry about losing your NCD.

However, it’s not always possible to keep all of your NCD. In the case of Club Care’s motorhome policy, you will reduce your NCD if you make one claim during a period of insurance. For instance, if you have five years’ NCD, you will go back to two years’ NCD if not protected. Therefore, protecting your NCD is really worth considering.

What about claims resulting from incidents in which you are at fault?

You can also protect your no claims discount so that you do not lose it even if you’re at fault, meaning that your insurer cannot reclaim their costs.

Protected no claims discounts are also available, subject to an increase in premium. Protected NCDs allow for at least one fault claim in a specified time limit without the claim affecting your No Claims Discount.

How else can your NCD benefit you?

It is possible to transfer your NCD between vehicles, so you won’t lose it if you’re buying a new vehicle. However, if you do change your car during an insurance period, you will need to stay with the same insurer until the period of insurance finishes in order to earn that year’s NCD discount.

You can then continue building your NCD when you change your insurer, provided you have proof of it. The total number of years’ NCD will be on your renewal notice — which your current insurer will send to you when your policy is nearing renewal.

The savings you make with no claims discounts will also depend on the number of insurance policies you have. For example, if you are a homeowner with a car, a motorcycle and a caravan, the four NCDs for your home, car, motorcycle, and caravan policies will add up to a considerable reduction in your overall outgoings.

Please be aware that, while highly useful, NCDs are not the only way to save money on your insurance. If you make a claim, your premium might still go up, even if you have a protected NCD. This is because your claims history will be used to work out your premium. The NCD is applied afterwards.

Ensure that you take as many other measures as possible to reduce your premium, such as fitting an alarm or immobiliser to your car, or storing your caravan on a CaSSOA approved site. The NCD will be even more of a bonus when it’s applied to an already low premium.

The importance of having your NCD free to use

A common misconception among motorists is the belief that you can use your NCD on more than one vehicle. You can transfer it to a replacement vehicle – i.e. a new car or motorhome etc. Once your NCD has been applied to one vehicle, you cannot apply the same NCD on any other additional vehicle unless you have earned a further NCD on another vehicle. An NCD can only be applied once. Or, alternatively, you can build up a different NCD with your insurance policy on any additional vehicle.

To discover more money-saving techniques and advice on vehicle insurance, head over to the Club Care Insurance website.