What Is Car Insurance No Claims Bonus and How Does It Work?

Auto insurance customers who never file a claim are exactly the type of customers that insurance companies love. Offering a "no claims bonus" is one way they reward these policyholders.

"No Claims Bonus"

A "no claims bonus" is exactly that: a bonus for not submitting any claims on a car insurance policy. Such a bonus will reduce car insurance premiums up to 60 percent over the course of five years.

How a "No Claims Bonus" Works

For every year that passes without a claim against the policy, the insurer reduces the premium a certain percentage. The reduction will vary by insurance company and policy. It is a good idea to verify these details at the policy's inception.

Losing a "No Claim Bonus"

A "no claims bonus" may be lost if any claim is made. It is not a "no fault" claim bonus, so any claim, by either the policyholder or another party, can nullify the bonus.

Protected "No Claims Bonus"

A protected "no claims bonus" is an additional protection you can purchase from an insurance company. This allows you to keep your bonus even if a claim is made on the policy. This coverage may only be good for one claim. The cost will vary, depending on the policy and insurance company.

References

• Dividend Money - No Claims Bonus Guide
• Business Dictionary - No Claims Bonus