No claim bonus on car insurance
Are you getting the best value for your
No claim bonus insurance schemes are promoted by insurers to
reward safe drivers or those who don't claim on their insurance.
But a no claim bonus does not always reduce the cost of your
premium. Here we explain how a no claim bonus works and what to
look out for when you buy car insurance.
What is a no claim bonus?
No claim bonus insurance schemes (also called no claim
discounts, ratings schemes or ratings levels) typically give you a
discount that increases each year you don't claim on your insurance
until it reaches the maximum level. This type of discount usually
applies to comprehensive car insurance.
How does a no claim bonus work?
When you take out car insurance, your no claim bonus is used to
discount your premium. Your insurer will calculate your
no claim bonus by looking at:
- The rating level you held with your previous car insurer
- Your claims history (and the claims of other drivers covered by
- The number of years you (and any other covered drivers) have
If you make certain types of claims on your policy, your no
claim bonus might be reduced when you renew your insurance. However,
even if you don't make a claim during the policy period, and your
no claim bonus stays the same, or is even reduced, your premium may
go up due to other factors.
How are car insurance premiums
When calculating your car insurance premium, the insurer usually
estimates the likelihood that you will make a claim on your policy.
Each insurer may work this out in a different way but factors they
can consider include:
- The value of the car covered by the policy
- Where your vehicle is kept overnight and how it is used
- Whether your car is financed
- The type of car you drive and how old it is
- Your age
- Your claims history.
The insurer could also take into account any no claim bonus you
may be entitled to, when calculating your premium.
How does making a claim on your
car insurance impact your premium?
There are typically two types of claims you can make on your car
- Claims where you are at fault (or even where
you are not at fault) or the claim cannot be
- Claims where you are not at fault and the
claim can be recovered.
At fault or non-recoverable car insurance claims
'At fault' or 'non recoverable' claims are those whose costs the
insurer cannot recover from the other driver involved in the
Each insurer has a different definition of what is included
under this category. Sometimes an event that you do not believe is
your fault could be considered 'at fault' by the insurer if they
cannot recover the cost of the claim from the other driver. This
type of claim can reduce your no claim bonus and increase your
Not at fault or recoverable car insurance claims
'Not at fault' or 'recoverable' claims are those whose costs the
insurer can recover from the other driver. This type of claim
usually does not reduce your no claim bonus. However, some insurers
can increase your premium after you make this type of claim,
depending on factors such as the type of car you drive, your age,
and whether the cost of claims your insurer has paid during the
year, has risen.
Case study: Lachlan's car insurance premium increases
despite his no claim bonus
Lachlan's car insurance premium was originally $1,000 per year.
Because he hadn't made a claim on his policy in many years, his
insurer gave him a 50% no claim bonus, which reduced his premium to
A few months later, Lachlan had a car accident. When he made a
claim, the insurer decided the accident was not his fault, so
Lachlan kept his 50% no claim bonus.
However, when he received his insurance renewal, Lachlan was
surprised that his premium had risen to $600. He asked his insurer
about this and was told that, because they were paying a lot of
claims involving cars similar to his, they rated Lachlan at a
higher risk of making a claim than they did before. As a result,
his original premium (before the 50% no claim bonus was applied)
had increased to $1,200. After applying his 50% no claim bonus, his
premium was $600.
To make sure you understand what your no claim bonus really
means, here are some questions to ask your insurer:
- How is my claims history used to calculate my premium?
- How much discount do I get from my no claim bonus?
- What are the different no claim bonus levels/ratings?
- What types of accidents do you consider my fault?
- How can I get a higher no claim bonus?
- How will a claim affect my no claim bonus?
- Do minimum premiums apply to the policy? (Some insurers will
set an amount that will be the lowest possible premium you will
Always shop around and find out what the insurer
is really offering you with a no claim bonus. Don't just stick with
your current insurer for a no claim bonus, as you could get a
better deal elsewhere. Some insurers allow you to carry across your
no claim bonus if you move your insurance to another company.
Last updated: 29 Nov 2017