In the world of motor insurance, the term ‘no-claims bonus’ is heard often. It is necessary to understand what exactly the term ‘no claims bonus’ means. A no claims bonus is a reward given to a policyholder for not making a claim on their car insurance during the period of the insurance. This happens when you go for renewal of your car insurance with the same insurance provider for another term. In effect this means is that if you renew your car insurance policy with the same car insurance company availing the implied no claimed bonus.
Things to understand
The no claims bonus is actually a future discount on your auto insurance premium. The insurer will give a discount on your future premium specially for being a good customer with a no claims history during your previous policy tenure. Without this your rate after renewal would have got the full premium rate. The insurance company thinks that they can retain you as a customer giving you the no claims bonus as you will be a less risk for them as you are less likely to make a claim.
On the contrary if you can do some comparative shopping online you may be pleasantly surprised to get a rate much cheaper than the rate your present insurer offered with a no claims bonus included. So you should understand that not making a claim may not help in obtaining a car insurance policy with a reduced premium. Most insurance companies limit the number of years of no claims to five. Ultimately the benefit of the no claims bonus benefits very few people and may not be significant. So it is wrong to think that you may not get a cheaper rate with some other car insurance provider than the rate offered by your current insurer with the no claims bonus.
The ‘no claims’ bonus is applicable only when you renew your auto insurance policy with the same insurer. The insurance company tries to retain you as you are a good customer without claims. But you may find better rates elsewhere if you do some internet research. So availing the no claims bonus with the previous company may not be very advantageous at all. It is also possible that you may end up paying a higher premium for your next term even after getting the no claims bonus. So it should be understood that the ‘no claims’ bonus may not make your future premium cheaper. You can check for cheaper rates elsewhere and avoid falling for this gimmick of the insurance company. It is possible to get really cheaper rate for your car insurance with companies vying with each other to attract new customers through innovative policies.
Caution
The no claims bonus given in the form of discount percentage increases with the number of years you have been with the insurer without making a claim. If you make a claim at some point of time during this period you will pay full premium on your next renewal.
Another point to remember about no claims bonus is that the insurer will offer this bonus only if you your policy within 90 days of its expiry.