To protect or not to protect your no claims discount?
The longer you protect your NCD without claiming, the less valuable it becomes, warns moneysupermarket.com
Drivers making a claim on their motor insurance policy, with an ‘unprotected' no claims discount (NCD), could see the cost of their premiums increase by a staggering 73 per cent, according to research by moneysupermarket.com.
The UK's leading price comparison site investigated the cost of protecting or not protecting your NCD. The research reveals if a policy holder who had five years ‘unprotected' NCD made a claim they would see premiums hiked from £528 to £911, an increase of £383, or 73 per cent. However, motorists with five years protected NCD making a claim would only see an 18 per cent increase, or £104 - from £590 to £694 - to the cost of their annual premium.
Steve Sweeney, head of motor insurance at moneysupermarket.com, said: "Building up your no claims discount over a number of years, can be a valuable commodity and can significantly reduce the cost of your premiums.
"Having reached the five year no claims discount level, many motorists will be reluctant to take the risk of losing it and may consider paying extra to protect it. With premiums on average rising by 73 per cent if you make a claim, paying extra to protect your policy against this sharp hike might be worthwhile. But be warned, if you protect your policy but don't make a claim for a number of years, you could find that you are eroding any potential savings."
Tipping point: Protected NCD vs Unprotected NCD
Motorists looking to ‘protect' a five year no claims discount (NCD) will pay an extra £62 on average on top of the cost of their annual car cover, however this varies significantly between providers ranging from around £8 to over £90.
The longer a motorist protects their NCD and doesn't make a claim, the less cost-effective it becomes. For example, in the first year, a motorist who protects their five years NCD, and makes a claim will be £155 better off on average, compared with a motorist who made a claim on an unprotected policy. However, because of the £62 annual cost to protect your NCD, if you haven't claimed until the third year, you will be £31 better off.
The tipping point comes in the fourth year when if you finally make a claim, you will have paid £31 more compared with someone who didn't protect their NCD and claimed.
Steve Sweeney said: "If you are looking to protect your no claims discount, shop around for the best deal available for your circumstances and if you do find a better deal with another provider, you can take your no claims bonus with you.
"It's crucial for motorists to understand the costs involved with premiums and additional fees for protecting a no claims discount entirely depends on your personal circumstances and motoring history, and on the provider. Furthermore, it's worth motorists remembering it is the discount they are paying to protect, not their premium - so if you do make a claim, it may well increase the amount you pay for your cover anyway."
The research also reveals there are vast differences in the small print between motor insurance providers for protecting a NCD; some providers such as ecar insurance will allow multiple claims on protected policies without penalty, while others will allow only two claims. In addition motorists will not lose their entire NCD if it is not protected and they make a claim - generally they would lose two years NCD.