From travel and home insurance to protection for your car, insurance is an essential part of everyday life. But the amount spent each year on financially insuring ourselves against unforeseen events can add up to a considerable sum. So it’s great when you receive something back from the companies that we pay to provide us our cover.
What does ‘no claims discount’ (NCD) mean?
Building up what’s known as a ‘no claims discount’ means you pay less for your home insurance than you would if you didn’t have one. Insurers like to have customers on their books with a history of not having made any claims, for obvious reasons:
- The insurance company hasn’t had to investigate and pay out any claims.
- Administration handling costs are less with no claims being made.
- The services of insurance loss adjustors and legal experts aren’t called for.
So those without any recent claims are highly sought after and in return for being a ‘good’ customer, insurers offer discounts on policy premiums. To calculate the discounts on offer for home insurance, insurers weigh up the number of years of no claims you’ve had, and also how many continuous the years are that you have had home insurance for. So if you have a break in your home cover, for any reason, this might reduce the no claims discount available to you.
How NCD varies from Car Insurance to Home Insurance
It’s worth noting how the rules for no claims discounts on home insurance differ to no claims discounts offered on motor insurance (see ‘What’s the difference between home NCD and car NCD?’ later in this guide for more details): With car insurance, you can have a break in your insurance payment history (you may not have owned a car for a while, for example) without it affecting the level of no claims discount you might get. But with Home Insurance you’re rewarded for continuity; if you stopped paying your home cover for any reason, it will probably reduce any no claims discount you might receive.
How much NCD will I get?
The longer the period over which you haven’t claimed, the bigger the discounts offered tend to be. Of course, these vary from insurer to insurer, so it’s always sensible to ask around when your policy ends and it’s time to find another. Just make sure you’re comparing like-for-like policies (i.e. those policies offering similar cover levels and exclusions etc.). A 12-month period without any claims will commonly net you a 20% discount, with the incentives rising with every year up to a maximum of usually five years, at which point discounts of 70% are not unheard of. Generally, insurers take up to a maximum of 5 years no claims into account, but some will look at an even greater number of years when working out what reduction in premiums to offer.
Can you lose your NCD if something is not your fault?
Don’t assume that if you make a claim for something that isn’t your fault it won’t affect your no claims bonus. Many claims made on home insurance probably won’t be for something that’s ‘your fault’, such as water damage caused by a frozen pipe bursting, or thieves stealing your possessions, but unfortunately insurers simply see that a claim was made and count it against you. Fortunately, if you a good number of years continuous home insurance cover, the effect on the discounts you’re offered of having made one or two claims would in all likelihood be marginal.
Should you always claim off your home insurance?
There are a number of factors to bear in mind if you’re considering making a claim on your home insurance, and the potential impact on your no claims discount should certainly be uppermost in your mind when weighing it up. Here are a number of key elements to bear in mind when deciding whether to make a claim or not:
- Check excesses – The ‘excess’ is the first part of any claim the insured (i.e. you!) has to pay, and can vary on home cover from £50 to even £500. You need to decide whether paying the excess is worth it in relation to the potential effect on your no claims discount.
- Smaller claims – If you’re thinking of submitting a claim which is relatively small, it might not be worth it in the long run if you weigh it against the no claims discount you receive (or might receive in future). The amount you might get for a claim after paying the excess could be less than the discount you receive. And don’t forget, discounts generally increase the closer you get to, usually, a maximum of 5 years of no claims.
- Check cover elsewhere – Before making a claim, check that you’re not covered elsewhere for the item, or items, being claimed for. Many credit cards and bank accounts now come with extras as incentives, such as insurance cover for common items like mobile phones and keys. In which case the claim wouldn’t have to go through your main insurer and your no claims discount wouldn’t be affected.
Can I move my NCD from one insurer to another?
Fortunately, your no claims discount is portable, just like your home cover itself. Insurers compete with each other to gain ‘good’ customers and this is reflected in the discounts they offer. Your history of continuous cover is also transferred. So make sure you shop around at renewal time. Even if you’re happy with your current deal you might find that telling your insurer you’ve had a better no claims discount offer elsewhere means they will match it. Some insurers will ask for proof of no claims history; this is usually in the form of previous policy letters and statements showing it.
What’s the difference between Home NCD and Car NCD?
As mentioned above, the rules regarding car no claims, as opposed to home no claims, can vary in a number of ways. Here are those rules regarding car no claims discounts that usually don’t apply to home no claims discounts:
- You can buy protection for your no claims – When it comes motor insurance, you can buy added protection that ensures your no claims history is maintained (even if you make a claim). It’s like insurance against having to make an insurance claim. This doesn’t apply to home insurance no claims discounts.
- No-fault claims – If you make a claim for an incident which was no fault of your own, then with car cover, this won’t affect your no claims discount in future. With home insurance fault doesn’t matter; any claim can affect your ‘no claims’ history.
- Non-continuous cover doesn’t matter – If you have a break in the continuity of your car cover (a maximum period of 18 months is commonly allowed), unlike with home insurance, it won’t have any impact on the discount you might get for no claims.