No Claims Discount (NCD)

No Claims Discount is a term frequently applied in motor insurance, but increasingly in other areas of insurance as well. A 'No claims discount' rewards a policyholder with a claim-free record. The scale of discounts varies from 30% for one claim free year rising in steps to as much as 65% or more after periods of up to six years.

The discount is usually reduced by two steps after a claim. Whenever a claim is made under a motor policy, the no claims discount will always be affected unless your insurer can recover its costs from another party.

If it can make a full recovery, or is only stopped from doing so by a 'knock for knock' agreement, your no claims discount may not be affected.

Similarly if you recover all your uninsured losses (such as accidental damage excess) then your no claims discount may not be affected.

But full recoveries are relatively rare because most accidents involve some blame on both sides. Sometimes your no claims discount will be reduced at policy renewal time if a claim is expected to come in, or is still waiting to be settled. The discount may be reinstated when the claim is settled.

If you are concerned that one claim will destroy your unblemished 'no claims discount', you can protect it. Many insurers offer 'protected discounts'. For an additional premium, you will be allowed to make up to two claims in a stated number of years without your no claims discount being affected.

See Also: Moneyextra Insurance Service

Last Updated: June 2007 © Moneyextra.com

MoneyExtra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.