How is no claims discount worked out

The thing is, a no claims discount is applied after your quote is put together. You might assume that an accident will spell a complete end to your no claims discount — but in actual fact, insurers offer a little more leeway than that. Not ideal if you fancy a big discount across all your cars — but perfect for other people who are hoping to build up their own discounts.

In the UK, every car is allocated an insurance group. This helps insurance companies determine the cost of cover. The groups run from 1, which offers the cheapest premiums, to 50, which offers the highest. The cheapest car insurance group is therefore group 1. If you make a claim on your car insurance, then yes, the cost of renewing your insurance will go up, unless some other significant factor works in your favour to bring it down. If you make a claim on your insurance policy, car insurance excess is the amount you will pay towards that claim.

There are two types of car insurance excess — one compulsory, the other voluntary. The compulsory excess that your insurance company sets is the amount you must pay towards any repair done to your vehicle if you cause an accident. Put simply, the reason why car insurance is high is because the cost of claims is high.

As a result, insurers increase premiums to protect themselves and make a profit. This can be done by being a named driver on someone else's policy either permanently or for a short period. Generally speaking, your car insurance covers your vehicle and damage that you may cause to other vehicles and motorists. Depending on the type of policy, it can also cover a range of additional extras, such as medical expenses and breakdown assistance.

If there are still no claims on your policy, you keep getting a discount. You can build up this bonus for a maximum of 15 years. Yes, you'll just need to send us the renewal notice your previous insurer sent you and your NCB proof, which they will also provide. A no claims bonus or no claims discount is usually valid for two years after a policy comes to an end. After such time you'll need to build a new no claims bonus. It depends what the claim is for; payments for windscreen damage or emergency treatment fees won't affect it.

Likewise, if the accident was the other person's fault and we recover all the money from their insurers, you won't lose your bonus. Even if you do have to claim for an accident that was your fault, you could still keep some of your NCB. If you make one claim during your insurance period, you'll lose two years of the bonus. If you make two claims during the period you're insured for, you'd lose four years' bonus, and if you made three or more claims during the period you're insured for, you'd lose them all.

If it was their fault, the third party insurer pays out and we recover our costs, it won't impact on your bonus. However, this doesn't mean your policy won't be affected. Insurance is all about risk — and as part of this an insurer will look at the number of accidents you have, both fault and non-fault. There are circumstances which could mean you lose your NCB even if the accident wasn't your fault.

Customers who drive claim-free can build up a discount on their car insurance. If you go five years or more without having to make a claim, that discount can translate into a considerable saving. However, you could lose all that without it being your fault, for instance if your car is hit by an uninsured driver.

So is it worth paying extra to protect your discount? You get a no claims discount for being a careful driver and not being in an accident where a claim is made. You could lose all that for just one accident. You would also normally lose your discount for being in an accident with an uninsured driver, if you had to make a claim on your own insurance.

The opportunity to protect that reduction might initially seem like a no-brainer. You'll continue to pay less on your premium even if you have an accident.

You might still lose your discount if you have a number of accidents in one year though.