How valuable is my no claims bonus - and should I protect my no claims discount?

The cost of car insurance has skyrocketed in the past year, peaking at an average of £861 a year in the third quarter of 2024.

Prices have since started to drop, with Confused.com finding that the average cost of a policy was £757 a year in the second quarter of 2025.

While drivers are paying less than they were this time last year, the cost of insurance is still well above pre-pandemic levels.

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There are some tips that you can follow to cut your car insurance premiums. You can consider a black box, pay upfront, or make sure you do not inadvertently invalidate your insurance.

You can also time the date that you renew your car insurance policy to make sure you are buying it on the cheapest day.

And simple, legit, ways of tweaking can also cut costs - see our article on how your job title can impact your car insurance and how to carefully word what you do for a living.

While these tips can help you pay less, one of the most powerful ways to drive down the cost of your car insurance is by making the most of your no claims bonus.

We look at everything you need to know about a no claims bonus, and describe how it can help you save on insurance costs.

What is a no claims bonus?

A no claims bonus is a type of discount that reduces the cost of your insurance when you renew it. You can get it by building up a history of not making any insurance claims.

The value of a no claims bonus typically increases with the number of consecutive years that you have not made a claim.

For example, while one or two years of no claims can put a dent into your car insurance premiums, a much more substantial discount can be achieved if you have gone the maximum 15 years without making a single claim.

There is no law that says insurers have to offer a no claims bonus, but most of them do. It is worth checking to make sure this is the case when you’re shopping around for your car insurance.

How does a no claims bonus work?

While insurers often have slightly different rules for how their no claims bonus works, they mostly follow the general idea that you get an increasingly large discount for each year that you do not make an insurance claim.

The value of your no claims bonus will differ from insurer to insurer, and different firms will offer different discounts for each year you have gone without making a claim.

Alicia Hempsted, insurance expert at MoneySuperMarket, said that “every year that you don't claim on your insurance your insurer will apply a discount to your policy, calculated as a percentage off your premium.”

“This discount saves you money on your current policy and can reduce the cost of a new policy,” she added.

Data showing the average value of a no claims bonus when purchasing a new policy can be found below.

Source: MoneySuperMarket, based on car insurance policies sold through MoneySuperMarket between 01/01/2025 and 16/07/2025

For the most part, you can also usually bring your no claims bonus with you when you switch car insurance providers, but you will need to provide proof of your no claims bonus.

Typically valid examples of this are renewal letters from insurers, cancellation notices, or a written letter by your insurer that proves you haven’t made any claims.

Hempsted said that “when purchasing a new insurance policy, your new provider will honour your no claims bonus up to a certain number of years and apply that discount to your new premium.” It is therefore a good idea to keep track of your bonus and make sure your insurer applies it.

Does a no claims bonus expire?

Generally, a no claims bonus can only expire for one of two main reasons.

Your bonus can expire if you have to make an insurance claim as you will no longer have made ‘no claims’, and therefore will stop being eligible for the bonus.

While this may sound a bit harsh on the surface, some insurers do not invalidate your no claims bonus for all claims.

For example, insurers may not cancel your no claims bonus if you were involved in an accident caused by another car recklessly driving.

Hempsted tells MoneyWeek that “your no claims discount might remain unaffected in certain situations when making a claim, like proving you weren't at fault in an accident or making a minor claim.”

Such minor claims that you can often make without affecting your no claims bonus are for things such as lost keys, getting your windscreen repaired or replaced, or making a claim under breakdown cover.

The other major way that your no claims bonus can expire is by terminating your insurance.

Naturally, if you are not driving then it does not make sense for the insurance company to let you keep a no claims bonus as you will not be making any claims.

While many insurers will allow you to keep your bonus if you simply stop being insured for a few months, most will scrap your bonus altogether if you stop being insured for a longer period of time.

Again, it is best to contact your insurance provider and find out what their terms and conditions are.

Should you protect your no claims bonus?

Whether or not you should protect your no claims bonus depends strongly on your own personal circumstances.

However, a broad consideration to bear in mind is that making a claim will often set your no claims bonus back quite a few years, possibly even taking you back to scratch – to check how much you could be set back, consult your insurer.

If you have only built up one year of no claims then this won’t hurt you too much, but it can be incredibly painful if you have built 10 years or more of no claims.

Data shown above shows that such a long no claims period could drive down your premiums by almost £1,000. So, if you have a small incident where you were at fault, it could sometimes be more cost-effective to pay out of pocket for a repair.

It is worth remembering, however, that each circumstance is different and you will need to think carefully about the options available to you.

Hempsted added that “when choosing between making a claim and protecting your no claims bonus, it’s worth keeping in mind your chosen excess, the cost of what you are choosing to pay for rather than claiming, and how your premium would change if your no claims bonus is reset.”

Some insurers allow you to take out certain policies that protect your no claims bonus even if you have a small prang that is your fault.

Some insurers offer protected no claims discount policies which allow customers to make a certain number of claims over a specified period of time without affecting their no claims discount.

This usually lets you make two claims over a three to five-year timeframe without losing your no claims record, according to the Association of British Insurers (ABI).

What claims you can make without affecting your bonus will depend on the terms of your insurance so it is always best to double check your documents before you make a claim, or contact your insurer.

You could see an increase to your premium if you take out no claims protection as part of your policy. The additional cost could save you money in the long run, however, as having less than a year of no claims means your premiums will soar.

It’s also worth noting that if you have an accident and decide to sort it out without claiming via your insurance, you still need to follow protocol. “Regardless of whether you’re claiming, you still need to inform your insurer if there is an incident. Failing to do so could invalidate your insurance and result in rejected claims later on,” Hempsted said.