Everyone goes to car insurance companies every month or every couple of months and sort of feels like they’re paying for services they’re not going to utilize. It feels like a one-way payment to the insurance provider. Most insurance companies offer everyone a bonus for not having any incidents resulting in a claim over the course of the year. This is called the no-claim bonus or NCB.  

No-claim bonus is one of the best discounts any driver can receive on their car insurance policy. It's a cash bonus insurance companies give the insured for not having a claim. It is an incentive for policyholders to drive safely, and yet the vast majority of policyholders do not understand the no-claim bonus or the no-claim bonus mechanics and what useful strategic decisions can be made to be able to build and protect an NCB.  

This insurance policy will be helpful in explaining insurance no claim bonuses as well as the strategies people can use to build no claim bonuses over the years and save on insurance.

Part 1: What Exactly is a No-Claim Bonus?

A No-Claim Bonus is a kind of financial break certain insurers provide policyholders who have not filed any insurance claims within a certain frame of time (usually, a year). Insurance companies could recognize these people as possible long-term customers with a low risk of making costly claims, thus, providing these people with perks in the form of discounted insurance.

Similar to loyalty schemes, insurers offering No-Claim Bonuses would award policyholders with a reduced insurance premium for each set timeframe they remain claim free (that is, added time requires no claims). Bonus systems like these are not introduced to encourage the making of claims, rather, insurance companies want to encourage better driver behavior, and a No-Claim Bonus serves to provide better built, long-term clients with discounted insurance, while also making more profit for their company.

No-Claim Bonuses are as a form of incentive to long-term clients of a company providing them with insurance and want to try and bring as many customers to their company as possible, as providing insurance for diverse customers is high profit for many insurance companies. Also the No- claim bonus will be diiferent based on your region, car insurance Qatar will be diiferent from a saudi insurance policy when it comes to No-claim bonus.

How NCB is Calculated  

In percentage, NCB is discount of the own damage premium. In other words, it is the discount of the portion of insurance that includes a car owner insurance (e.g., comprehensive and collision cover). Liability insurance is separate and is needed by law.  

The NCB generally follows a tiered structure. Each country and insurance company may have their own variation of it, but a common variation is something like this.  

20% after first claim-free year.  
25% after second claim-free year.  
35% after third claim-free year.  
45% after fourth claim-free year.  
50% after fifth claim-free year. Usually the highest discount.  

Example:  

Assume that, on average, the premium that falls under own damage coverage is $1,000 for your policy and that you have a 20% NCB. In that case, you would save $200.  
If you had a 50% NCB, you save $500.  

This gradually increases over multiple years, making NCB worth a lot of money because this discount on own damage coverage premium will not be lost.

Let’s start with what happens when you file a claim. It damages you claim-free history, and resets your No-Claim Bonus to zero.

You have a 50% No-Claim Bonus for five years. Then you get into a minor at-fault accident and file a claim for 1,200 dollars.

Your insurance company pays for the damages, but when your policy renews, you lose the 50% discount. That 50% No-Claim Bonus gets reset to zero, and you’ll have to pay the full premium.

This “all or nothing” reset is why it is important to weigh your options very carefully before deciding to file a claim, and especially before deciding to file a claim for a minor amount. You could end up losing years worth of premium savings for the short term benefit of coverage on a small repair.

Then the second part is the kind of benefits that come with a strong No Claim Bonus. You get to enjoy all the savings that come with it. But, you also have a very strong position with the insurance companies, and can negotiate or find very strong policies and options elsewhere.

1. Significant Premium Reduction

The biggest differentiator is the discount that is available. With a maximum NCB, you could reduce your own-damage premium by 50%. For many drivers, and especially those with newer and higher value vehicles, that is hundreds or possibly even thousands, not to mention the amount saved on a yearly basis.  Well-deserved money that financially stays within your budget.  

2. Portability and Insurer Independence

There is no car or insurance company your NCB is tied to and that is perhaps the most important part, as it grants you a lot of freedom.   

  If you switch insurers: If you discover a more appealing option with a different insurance provider, you can keep your NCB. In the quoting process, the new insurer will ask to validate your NCB, commonly found on your current policy's renewal notice. They will apply the NCB to their premium rates. As a result, you get to keep the discount you worked hard for, even if the insurance company is a competitor and has a lower premium.

When You Buy a New Car: You’re able to transfer your NCB to your new car insurance policy when selling your old vehicle and purchasing a new one. Since the discount was earned from your driving history, it goes with you to the next car as well.

The absence of brand loyalty, in particular, is very helpful because it allows you to stay discount, and allows you the freedom to compare market pricing at each renewal date.

3. Promotes Safer Driving Habits

Psychological incentives are the strongest motivators and the NCB system is a prime example of that. Knowing that any claim made could eliminate up to a 50% discount, you are less likely to claim. This in itself is a motivator to be a more mindful, and safe driver as well as eliminate distractions and keep a less strained following distance on the road. Essentially the system ensures that safe driving is in everyone’s financial interest.

Part 3: How to Maximize and Protect Your No-Claim Bonus

Protecting your NCB, and building upon it is equally important when it comes to maximizing your NCB. To ensure that you maximize your bonus, here are the most important steps to take.

1. Refrain From Making Claims Less Than Your Deductible Amount.  

This is the most important rule of NCB management. Before you call your insurer after a little bump or a slight scratch, please calculate.  

Example: You have a 50% NCB which translates to $400 in savings every year to your insurance premium. You back into a pole, repairing damage that will cost $700. Your deductible is $500.  

Option 1: You File a Claim. Your insurer will theoretically cover 200 of the damages ($700 in damage to the pole - $500 deductible). Renewing your insurance while entering your NCB will reset that entire thing to 0%. After this lost annual discount of $400, you will have to wait a whole 5 years to regain 5% of your NCB when you will be paying about $1,000 in higher premiums.  

Option 2: You Pay Out of Pocket. Without filing a claim, you will pay $700 temporarily. Not only that, but that $400 annual savings is locked in and not go away  

The Guideline: If you deductible is only slightly less than the cost of every i the repair, then you should pay the deductible yourself. Filing a claim that will only get you a couple hundred bucks back is not worth not having the discount for 5 years.

2. Make Your Deductible Choice Carefully

Your NCB along with your deductible are related. When you choose a higher deductible, you are less likely to submit small claims, thus safeguarding your NCB.

Opting to choose a deductible of $1,000 as opposed to $250 means you are choosing to take care of minor issues on your own. This self-insurance for minor issues is exactly the behavior that helps you maintain a claim-free record and build your NCB.

Moreover, a higher deductible saves you a chunk of money on your base premium, meaning you are saving money on top of your NCB discount.

3. Take NCB Protection Cover Into Account

The NCB Protector and NCB Protection are optional add-ons that most insurance providers will have. This additional coverage, at a small additional premium, lets you submit a specific number of claims on your policy in a certain time frame (i.e. One or two claims in 3 years) without negatively affecting your NCB.

Should this policy be accepted?

For long term customers and drivers with high No Claims Bonuses (NCB): If you've already had the maximum 50\% discount, an NCB Protector is a valuable layer of protection. Losing your discount is an absolute loss so the benefit of this peace of protection is warranted with the loss.

For younger drivers / new customers: If you have less than 50\% discount / little NCB, the protector becomes a loss of money with less discount to protect.

Understand the Small Print. Some protectors do not stop the NCB from resetting to zero, but instead just drop a couple of tiers.

Understanding which claims are most likely to be impacted by NCB loss is critical.

Only some claims will result in a No-Claim Bonus (NCB) reset. Typically, claims that are termed 'fault' claims that are covered by the own-damage section of your policy will reset your NCB.

Therefore, the following claims are unlikely to negatively impact your NCB: 

Claims of No Fault Accidents: Your NCB should remain the same if a driver hits you and a 3rd party insurance is responsible for all costs of your repairs.

Windshield claims: If your policy covers windshield repairs that are minor, (like repairs to a chip) to a windshield, they will likely not consider that a full claim and your NCB will remain the same.Add-on Claims: Claims associated with optional items, like roadside assistance, usually does not affect your NCB.

Always check with your insurer what claims, if any, will fall within the bounds of NCB protection or not. This will help you make an informed decision on whether you should pursue the claim.

5. Renew Your Policy on Time

A No-Claim Bonus will continue to be valid only if the associated policy remains in effect. Usually, if you let your policy lapse for more than 90 days, your accumulated NCB will be lost.

This is an automatic process, so make sure you renew your policy before expiry.

In the case of insurer switches, ensure that the new policy goes into effect the very day the old one does so that you can keep uninterrupted coverage and keep your NCB.

6. Transfer Your NCB Correctly

When it comes to switching cars or insurers, the process of transferring your NCB is usually smooth, but you have to make sure you get it done on your end.

Proof: When your policy is about to renew, your insurer will send you a proof of the NCB earned showing your name, policy term, and the percentage of NCB earned. This proof is what you need.

Provide to New Insurer: When soliciting a quote, provide this to the new company. They'll authenticate the document and issue the discount.  

Follow Up: Once you have bought the new policy, check your policy documents to confirm that the NCB has been applied. It is not safe to assume that this has been done.  

Part 4: Frequently Asked Questions About NCB  

Q: Does NCB get transferred to a spouse or child?  

A: No. NCB is earned and belongs to the main policyholder. It is not possible to transfer to someone else, even if they are part of the family.  

Q: What if, for some time, I do not have a car?  

A: As stated, your NCB most of the time expires if you do not hold any car insurance policy for a period of 90 days. If you expect to not have a car for a longer period (e.g. you're going overseas for a year), you should know that you may lose any built discount. A few insurers may have a grace period, so it's worth asking.

Q: Can I use my NCB on two cars at once?  

A: No. Each NCB may only be used on one policy. With such two cars, you have to accumulate a separate No-Claim Bonus on each vehicle policy. Nevertheless, some insurance firms provide a multi-car discount, which may help reduce the total cost.  

Conclusion: Drive Smart, Save Smarter  

Your No-Claim Bonus becomes a discount not just in monetary value, but also a true essence of your No-Claim Bonus. It embodies the value you have earned throughout the years. You have the unwavering choice to take your reward elsewhere for your insurance.  

You can protect your No-Claim Bonus by making rational decisions. Evaluating the deductible to your desire will also secure the safety of your No-Claim Bonus. Avoid filling in small claims, especially when you are near the maximum level.  

Your NCB reflects the effort you have made on the road, and if you engage in managing that discount, you will see that you are not simply making insurance payments. You are indeed, paid for the most important thing: safe driving.