I pay for protected no claims discount but my friend says the cost of cover will still go up if I claim. Are they right?

protected no claims discount

Many drivers think that by paying extra to protect their no claims discount (sometimes called no claims bonus) they are guaranteeing cheap insurance. Sadly that’s not the case and here’s why.

What is protected no claims discount?

The no claims discount (NCD) is essentially a reward given by your insurer for not claiming. It assumes that because you haven’t claimed for however many years you are less of a risk. It can therefore afford to charge you a lower premium. After a period of time, frequently five years, you can pay extra to keep your NCD if you make a claim.

But your premium will still go up…

Nearly two thirds of people asked in a survey incorrectly thought their premium would stay the same if they paid to protect their NCD. The reason it doesn’t is because the insurance premium and no claims discount are separate entities. Make a claim and your next premium will cost more because your insurer will view you as a higher risk. Your protected no claims discount will continue to give you a discount because of your previous good driving record; that discount will just be from a higher premium.

What is NCD protection worth?

The Association of British Insurers (ABI) says one year of no claims discount could reduce your premium by 30 per cent. Four or five years of NCD could equal a 60 per cent saving compared to insurance without an NCD . Research by Moneysupermarket.com showed that drivers without NCD protection will see their annual premium rise by 73 per cent if they make a claim.

protected no claims discount
Temporary insurers won’t offer to protect a no claims discount

But time plays a part

The longer you protect your no claims discount, the less worthwhile paying the extra becomes. That’s because as your premium falls (relatively) the longer you go without making a claim, the cost of NCD protection starts to exceed the amount your premium would increase by if you did make a claim.

The trouble is the rules are flexible

There are no hard and fast rules about the no claims discount. That’s because no two insurers treat claims the same way. How each deals with them can vary according to the driver’s circumstances and motoring history. Decide not to protect your NCD and not all insurers will take it all away if you claim. Some might only take a year or two away. Some may take it all off.

Insurers must spell out their NCD policy

Since 2016, insurers must explain how much a no claims discount is worth and what the cost will be if you make a claim. This is so when renewing your motor insurance you can decide for yourself whether it’s worthwhile paying the extra to protect your NCD.