Is it really worth protecting your no claims bonus (NCB)?

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Taking out a regular car insurance policy can be pretty confusing and overwhelming in the first place, especially when you consider other car insurance extras such as breakdown cover. 

There are so many factors to consider when taking out a car insurance policy and it’s a good idea to be aware of everything that you’re paying for and what level of cover it offers you.

So when it comes to the discussion of no claims discount and whether it’s worth protecting or not, it’s safe to say that you’ll probably be feeling a little more than confused at the prospect of knowing whether it’s worth it.

In this guide, we’ll take you through NCD meaning, what exactly it entails, plus whether protected no claims discount is worth it or not.

What is a no claims bonus?

A no claims bonus (NCB), also known as no claims discount (NCD), is the length of time that you go without claiming on your car insurance policy. After a certain period of time (usually around five years, but it differs between each insurance provider), you can enjoy benefits such as a significant discount on your car insurance premiums.

How do I get a no claims discount?

You can benefit from a no claims discount if you’re a careful driver and you never need to make a claim on your car insurance policy. After a certain number of years, you can then benefit from a discount on your car insurance premium as a reward for not claiming on your policy.

For every year that you manage not to make a claim on your car insurance policy, you will earn another year of no claims bonus. In some instances, some insurance providers may offer accelerated no claims bonus where you can earn a bonus in 10 months, rather than 12 months, for example.

While there are no limits on the number of years you can go with your no claims bonus, it’s worth noting that most car insurers will only consider a maximum of five years of NCB when working out the discount. Having said that, it’s still always better to try and go as long as possible without using your no claims discount.

What does protected no claims mean?

By protecting your no claims bonus, it enables you to have a certain number of incidents where you’re considered to be “at fault”, without it affecting your no claims bonus.

Your NCB is protected even if you have to make a claim.

What happens if I don't protect my no claims bonus?

Purchasing no claims bonus protection means that you will have to pay an added cost as part of your premium. However, if you decide not to protect your no claims bonus and you have an accident without NCB protection in place, you will end up losing your no claims discount and you’ll have to pay more in the future anyway.

Is it worth protecting no claims discount?

According to research carried out by MoneySuperMarket, you could see your car insurance premiums rise by 37% if you don’t protect your no claims discount, but you end up having to make a claim.

So, for example, if you reach five years with your no claims bonus, you will likely be reluctant to lose out on that, so you may decide that no claims discount protection is worth purchasing so that you don’t lose out.

If you’re looking to ‘protect’ a five year no claims discount (NCD), you will end up paying approximately £33 on average on top of your annual car insurance policy.

While some people won’t want to spend that extra money, if you’re determined to protect your no claims bonus and you’ve gone a long time without using it, then it can be considered to be worth paying to protect it a little longer. 

However, it’s important to be aware that there is a ‘tipping point’ when it comes to determining whether it’s worth protecting your no claims discount; the longer you protect your NCD and don’t make a claim, the less cost-effective it actually becomes.

While in the first year of protecting your no claims bonus and you end up making a claim, you will be approximately £54 better off, if this happens in the second year of your no claims bonus protection, you will only be £21 better off.

As the years go on, you could actually end up paying more by paying to protect your no claims bonus than if you were to not protect it.

It can be quite a complex thing to understand and deciding whether it’s worth protecting your no claims bonus or not needs to be determined on an individual basis, based on numerous factors such as how much you pay for your car insurance premium and how much it will cost you to protect your no claims discount.

If you do decide to protect your no claims bonus, then it’s always worth shopping around in order to get the best deal. While some car insurance providers might offer great car insurance policies, their deals on no claims discount protection might not be so great. For example, some car insurance providers might only offer 2% cover of the sum it is protecting, whereas another provider could cover 15%. Therefore, it’s essential to shop around to try and find the best deal for you.

You’ll need to think about both these things and weigh up the pros and cons of purchasing no claims bonus protection as an extra add-on when you take out your car insurance policy.

It’s also worth noting that the cost of your car insurance premium might increase each year, regardless of how good of a driver you are, so it’s worth bearing in mind these potential additional increases in the cost of your car insurance when deciding whether to protect your no claims bonus.

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