No-claims discounts are meant to encourage people to drive safely through the promise of lower premiums. But do they really save you money long-term?
What a no-claims discount means for you
It seems like a win-win: customers get a discount on their insurance and insurance companies save money because they have less claims to deal with. And with each passing year you don’t make a claim, your discount usually increases.
Unfortunately, this means that one little claim (unless you are found to not be at fault) could ruin years of hard work because insurers will deem you a risky driver and increase your premiums to recoup their losses.
In theory, no-claims discounts sound like a great incentive, but does it really save you money?
After five straight years of making no claims, you could potentially benefit from a discount of up to 75-85% off your annual premium, but the discount differs from provider to provider. Some companies will actually limit the number of years that you can accumulate a bigger discount, but all insurers will vary, so it’s best to check the policies offered by your insurer.
How a claim will affect you
If your insurance company pays out on a claim you’ve made, you will likely lose all or at least part of your no-claims bonus, depending on the circumstances surrounding the accident and the number of no-claims years you have under your belt.
If both parties are found to be at fault, or neither party can agree on who is responsible, both individuals involved in the accident will inevitably have their premiums increased. In the event you are involved in a collision with an uninsured driver, your insurance company has two options: they might choose to preserve your no-claims discount or your perfect driving record could be completely reset.
If you’ve managed to go five years without making a claim and find yourself needing to do so, some of the policies out there will only knock off a few years of no-claims from your record so you’re not right back to square one.
However, if you are not liable for the accident, your no-claims discount remains unaffected. Once again, reviewing the policies you are considering will help clear up any questions you may have about making a claim.
Protecting your discount
According to research conducted by MoneySuperMarket, making a claim within the first five years of a policy could result in a premium increase of up to 30%. You do have the option to pay extra to protect your no-claims bonus, which only increases your premium by 8%.
However, your discount will only go so far. This type of policy usually benefits newer drivers so after years without a claim, the cost-effectiveness of your policy goes down because insurers tend to raise rates anyway the longer your keep the same one.
As we have discussed in previous articles, you are better off shopping around at each renewal period, switching providers or renegotiating your policy to find the best rates.
Here at All Med Pro, we know that your insurance requirements aren’t limited to your professional life, so we offer support for your personal needs as well.
Our range of expertise includes an extensive knowledge of the car insurance market so we’re happy to provide guidance when selecting a policy. We also offer GAP Insurance and we’re happy to consult with you to confirm whether you qualify and help you select the best policy that provides protection for the depreciation of your prized vehicle.
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