No Claims Bonus Discount

 

No Claims Bonus Discount

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No Claims Bonus Discount

It is well established that comparing the market and searching for the cheapest car insurance quotes is a good way to save money. Simply doing a car insurance comparison isn’t the only thing you can do to reduce the cost of your car insurance, though. In addition to that, you might also think about building up your no claims bonus discount. If you can build up several years worth of no claims bonus discount, then you can have greatly reduced insurance premiums over the long run. So what is this discount and why is it so important?

What is a no claims bonus discount?

The discount is designed to reward drivers who don’t file claims over an extended period of time. Essentially it allows you to build up a larger and larger discount the longer you go without filing a claim. This provides a great incentive to drive safely, as you can end up saving a ton of money if you avoid accidents.

What do insurance companies offer these discounts?

The primary reason why insurance companies offer these discounts has to do with competition and the market. If you use a car insurance supermarket to find quotes, you will see that there are lots of different companies out there today. Each of these companies is looking for a way to offer a little bit more to consumers.

Likewise, they can offer these discounts because insurance is all about risk. If you can go a few years without getting into an accident, it shows the insurance company that you are a competent, responsible driver. It is an indication that you truly know what you are doing. As a result, they take on lower risk by insuring you. Companies pass along these savings to drivers through no claims discounts. In this scenario, everyone wins, including the insurance company.

How are the claims calculated?

Know that not all insurance companies view these discounts the same way. Some will calculate them differently from others, so you should check out the individual company’s policy before you make a decision. Still, there is something of a standard to how these discounts are put together. As a general rule, they are calculated on a percentage basis. That means that you will receive something like a 30 percent discount after one year of no claims, a 40 percent discount after two years, a 50 percent discount after three years, and 60 percent plus to normally a maximum of 70 percent. Once again, the actual amount of the discount will vary, it pays to compare car insurance from many providers so shop around for the best possible policy.

How can this no claims bonus be lost?

Some people think that the discount is only lost if they are at-fault in an accident. This isn’t really the case, though. When you have a no claims discount, you can lose it by filing any claim. That applies even if you were not at fault in the accident. This makes it very important for drivers to take care out on the roadway. Any accident, even those where the other person is at fault, will make your insurance company believe that you are a higher risk driver. This is where defensive driving tactics come into play, so make sure that you are always on the lookout when on the roadway.

Some insurance companies will give you the option of taking out a “no claims protection” extra on your policy. This means that you will not lose your discount under certain circumstances even when a claim is filed. This costs money, though, and there are many restrictions that come into play. Thing about this as you make your ultimate decision on which cheap car insurance policy to take out.