Older drivers, who have fiercely protected the no-claims discount on their car insurance for years, aren't getting as much benefit from it as they think. It means that if drivers have been paying to keep their discount protected, there's a good chance they're wasting their cash.
It's easy to see why we are so protective of no-claims discounts, because in the first few years, we see enormous reductions in our policies for each year we go without a claim. The discount varies between insurers, but tends to start at between 30% and 40% for the first year, then 10% for the following year - and each additional year that you go without a claim,
However, a report in the Guardian has highlighted that the way these subsequent reductions are applied vary across different insurers. In some cases reductions are far slower to come through, and in others the insurer caps the number of years in which it is discounted - so you get no additional benefit for each year you go without a claim.
In most cases, although motorists can expect a reduction of 50% within the first three years, in subsequent years the changes will often be comparatively tiny. In some cases, an insurer will offer a 75% discount for five years without a claim: in other cases, the discounts are far less generous.
And in the vast majority of cases, once you have gone ten years without a claim, you get no additional discount for any additional years. It means that someone who has been driving claim-free for 30 years receives no extra benefit for their safe driving than someone who has two decades fewer behind the wheel.
This is disappointing enough in itself. However, if you are one of the 30% of drivers who have been paying to protect your no-claims discount, it's downright annoying. Protecting your no-claims discount adds between 5% and 10% to your premium, and the savings are questionable.
Will it save you?
Generally if you make a claim and you haven't protected your discount, you will lose all or part of your no-claims discount. For those with relatively short periods without a claim they will tend to lose 2-3 years of no-claims. For those with longer no-claims periods under their belt, they could easily see, for example, their no-claims period shrink from 15 years to three years.
However, it's worth highlighting that this isn't as bad as it may seem. With three years of no-claims discount you already have a 50% discount, and you can build it back to 75% within the next five or six years.
Compare that to the alternative of spending roughly £1,000 protecting your no-claims discount for 15 years, and you could find yourself better off taking the loss of the discount on the chin.
Moneysavingexpert points out that because of the way different insurers price differently for risk, it's impossible to tell at what point protecting your discount becomes a waste of money. It suggests getting quotes both with and without no-claims protection, and with your existing no-claims history, and with two year's fewer of no claims. This will help you work out what losing your bonus would cost you, and whether it's worth paying to protect it.
It's worth bearing in mind that even with a protected discount, if you are in an accident, your insurance premium will go up. You are protecting the discount part of the price, rather than the overall price, which will rise to reflect your claims history. Your insurance premium could easily increase by hundreds of pounds after an accident.
Older drivers, who tend to have longer no claims periods, have every right to be irritated by this quirk of the system. However, they can shop around among insurers to find those who reward no-claims with the biggest discounts.
So, for example, Aviva offers discounts of up to 70% for those with 15 years without a claim. Meanwhile, the Co-operative insurance offers a 70% discount for five or more claim free years. It will then increase the discount in subsequent years to 72%, 73%, 74% and then 75%. John Lewis also offers a 75% discount after nine years.
One of the most generous is LV= which advertises discounts of up to 80% for those with nine years of no claims discounts.
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