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Home Insurance No-Claims Discount Explained

People are always looking for ways to save money on their insurance, and with average monthly cost of home insurance in the UK exceeding £150 it’s a great place to start. One way that you can try and shave some of that monthly fee off is with a no claims discount, a phrase generally associated with car insurance. If you are unfamiliar with how this works with home insurance, then fear not as we’ve put together a few pointers to keep you in the know.

In this guide:

How does it work?

A no claims discount or NCD is exactly what it sounds like, the longer you go without making a claim on your policy the cheaper it will be. You will first be eligible for a no claims discount if you don’t claim for 12 months with further discounts being possible for longer periods of time and with the maximum discount generally being achieved after 5 years.

Your no claims record is also transferable between insurers so if you build up a no claims discount over a few years then you can take those savings to another insurer if you want to. This can be a great way to save money as many insurance companies will entice customers with special offers based on how many no claim years you have, putting you in a good position to secure a good deal.

Why do insurers do it?

The last thing that an insurance company wants to do is pay out on a policy, and with things like home insurance the costs can be astronomically high. By offering no claims discounts, the insurer discourages homeowners from claiming on small matters.

While it might seem strange to have an insurance policy that actively discourages people from claiming and counterintuitive to do so, it can make sense for both parties. The idea is that by keeping the cost of your monthly fee down, you will actually benefit more by paying for some small damages such as a window being broken, claiming might save you a few hundred pounds but will increase your premium to a point where it becomes a false economy. As a result, the majority of people will see their home insurance policy as there in case of a serious accident such as a fire or a burst pipe when the cost of the damages far outweighs the discount of the no claims bonus.

How much can it save you?

This will vary from company to company but generally you could save anything up to 30% for going for 12 months without making a claim, with this figure going up to anywhere around a 70% discount for 5 years which is the limit. This figure will of course be offset by any small costs that you choose to pay for to keep your no claims bonus so it’s always worth calculating what the potential costs will be over the next couple of years when considering a claim.

Can you keep your no claims bonus if you claim?

Surprisingly there are ways in which you can keep your discount intact even if you decide to make a claim. Certain insurance companies will offer no claims protection on your policy, although this will generally only be offered to those who haven’t claimed for a few years. This no claims protection will allow you make claims up to a certain cost that will either not affect your no claims bonus or not affect as much.