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No Claims Discount – what is it and should I protect it?

Many people get confused when it comes to their No Claims Bonus and the discount it provides. We’ve had a look into the different levels of protection you can choose from and explain the benefits of each.

For every year of claims-free driving, you’re rewarded and given a discount. This is usually capped when you reach 5/6 years at which point you have earnt a ‘full bonus’. There are two levels of protection that can be added once someone begins earning a bonus, full and step back protection.

This add on varies from insurer to insurer, essentially it’s an additional charge to guarantee your no claims bonus will remain intact.

Full Bonus protection:

Companies will offer varying levels of protection ranging from allowing one claim in 3 years to 2 unlimited claims in 5 years without it affecting your no claims discount.  In most cases, this means that after the first claim your no claims bonus will remain unchanged but the following one then means your protection would be reduced to step back.

Stepback Bonus protection:

This essentially means your bonus is protected from reducing to zero. So in the event of a claim, it would reduce from 5 to 2 years as opposed to 5 to 0.

The time frame is a key factor as well, as for many companies, despite promising two claims in 3 years the time frame is not taken from the policy inception but rather the date of the first claim. This means if, for example, you were with AIG for 3 years and had opted for their no claims bonus protection scheme of 2 unlimited claims in a period of 5 years. If you were to claim 3 years into your policy you then have to wait a further 5 years before you could avail of the no claims bonus protection again.