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What is No Claims Discount (NCD) Protection - And Should I Buy it?

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After years spent building up a No Claims Discount (NCD)—also called a No Claims Bonus (NCB)—many motorists worry about losing their NCD if they claim. After all, an NCD can save you hundreds of pounds a year on your car insurance premium.

There's one way to keep from losing your NCD if you claim, and that's by paying an extra premium to "protect" your NCD. With NCD protection, you can keep some or all of your NCD even if you make a claim—the level of protection varies by insurance provider. Is NCD protection worth the cost?

What is a No Claims Discount?

A no claims discount (NCD) is a percentage reduction to your insurance premium; the percentage is determined by the number of years you haven't made a claim. After the first year a 30% NCD is quite common, often increasing to 50% - 60% by the fifth claim-free year. NCD rates will vary by provider, and some cap the discount after 5 years or so.

For example, if you have a 60% NCD and your premium without any NCD would be £1,000, then you only pay a £400 premium (£1,000 less 60% or £600). The NCD can represent a significant savings.

As long as you don't make claims, your NCD rolls over year after year, possibly even growing. However, making a claim will reduce or eliminate your NCD. The more claims you make, the more the NCD is reduced until is it totally lost. In general, the first accident will result in your NCD being knocked back by two years—but insurers may only look at your last five years which means a motorist with 9 no-claim years could be left with only a 3-year NCD (5 years – 2 years).

Example of Losing Your NCD (Admiral)
After 1st Claim2 years of NCD lost
After 2nd Claim4 years of NCD lost
After 3rd ClaimFull NCD lost

Keep in mind that every insurer operates a different set of NCD rules, both in terms of earning and losing your NCD.

Is NCD Protection Worth it?

NCD protection is essentially another form of insurance which protects your NCD in case there's a claim on your insurance—this can include incidents where you make a claim on your policy, someone else makes a claim against you, or even cases of an uninsured driver hitting you.

Example: Let's say your starting premium is £1,000, you have 5 years of unprotected NCD that gives you a 60% discount, you need to claim and the terms of your policy state that one claim reduces your unprotected NCD from 5 years to 3 years. By claiming you then lose two years of NCD, costing you £150:

Sample NCDStarting Premium (£)Discount (£)Your Insurance Cost(£)
5 Years NCD of 60%£1,000£600£400
3 Years NCD of 45%£1,000£450£550
Difference-£150

However if you had NCD protection, your NCD would have remained at 5 years/60% even after the claim, saving you £150 a year in this example. So to decide if NCD protection is worth it, do some rough calculations based on your individual premium and NCD—and then consider how much you're being quoted to protect your NCD because the cost to protect a NCD can range from £2 to nearly £100.

You May Pay More After a Claim, Even with NCD Protection

NCD protection guards your NCD only from dropping in the event of a claim—but your premium may still rise. In fact your premium is likely to increase after making a claim. As a result you may pay more when you renew, even with NCD protection.

For example, let’s say your base premium is £700 per year, but your 40% NCD means you only pay £420 for your policy. If you make a claim (and have NCD protection) your 40% NCD holds steady, but your base premium may increase the following year, say to £800. Now you pay £480 for the same policy (£800 less 40%). So your premium rose by £60 a year, even though you had NCD protection.

Example of Insurance Premium Rising with NCD Protection

Starting Premium (£)NCDYour Insurance Cost(£)
£70040%£420
£80040%£480
Difference£60

When deciding if NCD protection is worth the cost, keep in mind that it may not fully protect you from a rise in cost in the event of a claim. NCD protection only protects your NCD—not your premium.

FAQs

A no claims discount (NCD) is a percentage discount on your insurance premium that you earn by not claiming. Each year you don't claim will increase your NCD, up to a point.
Protecting your NCD is paying an added premium to buy extra insurance to protect your NCD from dropping, even if you claim.
A NCD will usually last for 2 years if you're not using it; if you're using your NCD there's no expiry.
You can get proof of your no claims discount by contacting the insurer with which you earned your NCD. Alternatively, check your renewal notice as this may list your NCD. Finally, you can request any data that may be held by the MIB/Claims and Underwriting Exchange (CUE) on your claims history.
No, you can't use your NCD on more than one car at once. If you sell your car and get a new one, however, you can transfer your NCD to the 2nd car.
The value of an NCD depends on two things: the % discount (which varies by insurer buy typically ranges from 30% to 70%) and your underlying premium. If we use the average amount paid for car insurance in the UK of £484 a year and assume most drivers have a 50% NCD, then a no claims discount is usually worth around £484.
This depends on your insurer, but it's common to lose around 2 years of NCD if you make one claim.
Unfortunately, you cannot earn a no claims discount as a named driver. However, if you've been a named driver then your insurance company may give you a "named driver discount" on a new policy when you get your own car.
This varies by insurer, but it's common to get a 30% discount when you have a 1 year no claims discount.

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