No Claims Bonuses: How They Work

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Claim car insuranceCar insurance companies in the UK incorporated a program called a No Claims Bonus or No Claims Discount. The meaning behind these programs is for the consumer to help lower their car insurance premiums.

How no claims bonuses work
How the no claim bonus works is the lower risk a driver is, the lower their premium. If a driver doesn’t make any claims, it means the insurance company is saved the expense of paying out money for losses, because of this, the following year their premium will be less. A person who is judged more likely to be making a claim, the car insurance companies know this and their premium continues to rise each year.

Car insurance companies determine premium rates by doing background checks, credit history, and past driving record checks. They also include your place of residence, where the car is overnight, the age of the registered driver, and the type of car driven. All these characteristics are added up together to determine your premium rate.

No claims discounts allow the driver to be more responsible about their vehicle and when driving. If no claims are made, each year the premium reduces. The discount is calculated as a straightforward percentage of the total cost of the insurance premium and will be discounted each year a claim is not made. Every car insurance company has its own method for determining the exact amount to discount off the premium but the commonality is the max number of years to accumulate the no claims discount is five years. Also, drivers can insure their no claims discount to protect it once the five year discount maximum has been reached. This charge is added to your insurance policy.

How they are calculated
Each car insurance company will have its own method of calculation for the exact discount they will allow on premium (the so-called ‘bonus’) that can be provided, some give a 65{e83fae05fd8664706586e01d5e99990feb730e6d7f32baf0caf03afa1f132bf5} discount. There is, however, a fairly typical schedule for no claims bonuses that gives an indication of the rough amount of discount you might reasonably expect to be quoted. The maximum number of years discount given by an insurer can also vary but averages out at a maximum of five years. The total no claims bonus can be as much as a 65{e83fae05fd8664706586e01d5e99990feb730e6d7f32baf0caf03afa1f132bf5} reduction in premium for non-claiming drivers, and this can be accumulated as a rough guide by:

· 30{e83fae05fd8664706586e01d5e99990feb730e6d7f32baf0caf03afa1f132bf5} bonus after the first year
· 40{e83fae05fd8664706586e01d5e99990feb730e6d7f32baf0caf03afa1f132bf5} after the second
· 50{e83fae05fd8664706586e01d5e99990feb730e6d7f32baf0caf03afa1f132bf5} after the third
· 60{e83fae05fd8664706586e01d5e99990feb730e6d7f32baf0caf03afa1f132bf5} after the forth
· and 65{e83fae05fd8664706586e01d5e99990feb730e6d7f32baf0caf03afa1f132bf5} following five years if no claim is made on your insurance.

Insuring the no claims bonus allows drivers to switch from one insurance company to another without losing their added years. Many drivers admit to fixing their damage vehicle without reporting it to the insurance company to protect their no claims discount. For every insurance company shopped, drivers need to read the policy details in detail to make sure they are insured with all the coverage and options they need