Should I Protect My No Claims Discount?

We all know how your car insurance premium can rocket after a claim, so is it worth paying out extra to protect your built-up no claims history? We take a look.

Car insurers like people who don’t make claims because it means they don't have to pay out.

So, as a 'reward' for claim-free driving, and as an incentive to keep up your good track record, insurers will give you a no claims discount that will help to knock down the price of your policy.

Most car insurance providers will offer a no claims discount after you’ve successfully driven claim-free for one year, with the discount increasing incrementally every year after that that you continue to remain claim-free.

Generally you’ll be able to see your no claims discount increase year on year to a maximum of 5 years, at which point you could see your premiums reduced by as much as 60-70%. So staying claim-free can certainly help you to save a substantial amount on insuring your car over the years.

What is no claims discount protection?

A significant no claims discount is an enviable asset for any car-owner.

It means that you have driven safely over those years, had no accidents, suffered no thefts or damage that you would need to claim for, and have earned your reward by seeing your premium drop dramatically.

But imagine if after years of claim-free driving you suddenly needed to claim.

Unfortunately, the likelihood is that despite your blemish-free driving history, your insurer will erase your no claims discount and ramp up your premiums accordingly.

This is where no claims discount protection comes in - it rather usefully ensures that if you do need to make a claim on your policy, your hard-earned discount won’t be affected.

It does, however, come at a cost.

Why protect my no claims discount?

Sometimes making a claim is unavoidable, however good a driver you are.

Protecting your no claims discount is a way to ensure that you won't lose the financial benefit of years of careful driving just because you suddenly need to make a claim. You get the reassurance that you can claim on your policy without saying goodbye to your claim-free existence, and without your wallet having to suffer the blow.

When car insurance costs as much as it does it really pays to be claim-free – and no claims discount protection helps you retain your status as a claim-free driver 

Are there any reasons why I shouldn’t protect my no claims discount?

Though protecting your no claims discount can seem like the wisest thing to do when you take out a car insurance policy, it is still worth weighing up the cost to see if it will really be worth it for you.

Remember that protecting your no claims discount will mean that you are paying more for your car insurance. Naturally how much more you pay for protection varies from insurer to insurer, but you could be looking at paying between 10% and 20% more on your policy to protect it.

Paying this additional amount isn't likely to be worth your while if the extra you'd pay in premiums after making a claim is less than what you would have to pay to protect your no claims.

So, you should compare:

• what it would cost to protect your no claims discount

• the cost of insurance without protected no claims
• the cost of insurance with no claims discount protection
• what your premium is likely to increase to if you did make a claim without no claims protection

It may be a good idea to get quotes for each of the options to get a clearer idea - though they may not be able to give you exact amounts as calculating risk is, like many other things, not an exact science.

How many claims can I make?

Having no claims discount protection doesn’t mean you’re ‘invincible’and can make as many claims as you like, scot-free.

In fact, you can usually only make one or two claims during the policy year without losing your no claims discount protection, after which any subsequent claims will not be covered.

It’s worth noting that sometimes no claims discount protection may not be as necessary as it sounds – not all insurers will immediately snatch your discount away from you if, for example, you have made no claims for the past 4 or 5 years.

If you have proven that you are a low-risk driver over time your insurer may simply scale your discount back, for example from 5 years of no claims to 3 years instead. For this reason it's always worth investigating the ts and cs of any policy you're interested in.

What else should I consider?

While having no claims discount protection may mean that your discount is protected and stays in place, the fact that you have made a claim doesn’t go unnoted.

This means that while your discount may remain, your perceived risk may still go up and you still may face premium rises in the future due to your risk of making a claim.

Remember that every insurer interprets no claims discount protection differently; for example even if you have protection in place this may not apply on some policies if you are perceived to be at fault – if you didn’t take reasonable steps to secure your car against theft, or were driving carelessly.

So it’s important to look at the terms and conditions of when this protection would actually come into force on any policy before you buy.

So...

Protection for your no claims discount can be an effective add-on to your car insurance policy and can mean you don’t end up paying over the odds for your policy if you’ve had to make a claim.

Just make sure to weigh up the total cost of adding this to your policy before you buy, as well as making yourself aware of all the t’s and c’s your particular insurer has in place.