A no-claims discount gives you money off next year’s household insurance premiums, as a reward for not claiming on your policy over the previous 12 months. It’s a great way of helping to cut the cost of cover.
How it’s worked out
A no claims discount is basically a reduction in price worked out when you take out cover in the first place.
It’s based on the number of years you’ve had cover without making a claim, and can run to hundreds of pounds in annual savings.
Types of insurance with no claims discounts
Most people understand no claims discounts from having car insurance, where multiple claims are fairly common so insurers advertise some really tasty discounts for those with a clean claims record.
The same applies to most other types of insurance, from household to medical, whether you’re buying cover with an insurer for the first time, or are have been with the same provider for a number of years.
Why consumers benefit across the board
To a degree, this approach is in the consumer’s interest as it discourages smaller, less serious claims, which usually involve the consumer meeting the first part of any claim anyway, known as the ‘excess’, to use the jargon. The excess is usually in the region of £150 to £250 for home or car insurance, for example.
It also allows insurance companies to keep the costs of handling and administering claims down, allowing them to keep the cost of cover competitive, and therefore benefiting the consumer in general.
How much discount can I get?
With cover such as car insurance, having at least five years no claims can mean much as 70% off the cost of cover. It’s usually less with other types of insurance, but is still often significant and worth checking it’s been applied.
What’s the point in paying for cover if I don’t claim?
The possibility of losing your claims discount might discourage you from claiming for smaller things that go wrong, but the cover is still there for more serious events.
It’s the difference between claiming for accidentally breaking a £300 television, or flooding causing £10,000 worth of damage.
What happens if I switch insurers?
No claims discounts are carried over between insurers. The number of years you’ve gone without claiming is on record so they can check.
But what if I do decide to claim for a smaller sum, as I simply can’t afford to meet the cost above the excess myself?
Unfortunately, no matter what size the claim, you would lose your no claims discount on house insurance.
Helping to keep cover costs down
Building up a no claims history is one of the main ways of keeping insurance costs down, along with improving security if you’re buying home insurance, and shopping around at renewal time.
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