You may have heard of the term ‘No Claims Discount’ but do you really know how it affects you? Read on for the low-down on what it means to have years of no claims discount and how you can use this to potentially reduce your home insurance premiums.
What is no-claims discount?
You’ll qualify for No Claims Discount (NCD) if you did not claim on your home insurance the previous year. Many insurance providers offer lower premiums as a thank you for not claiming on your policy.
Typically, you’ll qualify for 30% in the first claim free year, 40% in the second, 50% in the third and if you get to 4 years without a claim you’ll get 60% no claims bonus, which equates to big savings on your premiums!
If you do have to claim on your home insurance, you could lose your NCD which could well mean increased premiums when you come to renew or look for new cover. If you have buildings and contents cover with different providers, claiming on your contents cover should not affect any NCD you have accumulated on your buildings policy. However, some insurers do honour separate NCD for both buildings and contents, so check where you stand should you need to claim.
Protecting your no-claims discount
If you haven’t claimed on your home insurance for five years or over, you may be eligible to protect your NCD. This is really a loyalty incentive and it means that you can make a claim without this impacting the no claims discount you have accumulated over the years. It may cost you more to protect your NCD and you need to think about whether the increase is worth it for level of cover you have. Considering that next year’s premiums could go through the roof if you claim, chances are it is worth protecting.
If you’ve managed to go a few years without claiming, you need to work out whether it’s worth using your home insurance for small incidents as the savings you can gain on your NDC can offset the cost of replacing lost or damaged items out of your own pocket.
Read our home insurance articles and guides for more great topics or get a home insurance quote.