Protecting your no-claims bonus - is it worth it?
Building up a no-claims discount over a number of years is the best way to reduce the cost of your car insurance premium, and while each insurer has
its own scale, many offer a no-claims discount of up to 70 per cent for drivers who haven't claimed for over five years.
Typically, you will be offered the chance to "protect" your no-claims discount at this stage, and you may be tempted to sign up, to ensure that if you
have an accident, this bonus will remain intact.
But given that motorists looking to protect a five-year no-claims discount could face a premium of up to Â£90 on top of the cost of annual car insurance
, is this a benefit worth forking out for?
Beware of the "step back" scale
If you do decide to leave your five-year no-claims discount "unprotected", you do need to be aware of the "step back" scale if you need to make a
claim, as with most insurers, a certain percentage of the discount is lost for each claim.
This means that if, for example, your insurer offered a maximum no-claims discount of 65 per cent, the first claim would reduce the no claims discount
to 50 per cent, and the number of no claims years to three, according to financial analyst Defaqto.
The second would then reduce the discount to 30 per cent, and the years to one, and the third would result in no discount being given - and the
number of years to 0.
"The motorist could therefore lose a substantial discount unless they have paid to protect their no claims discount," says Michael Powell from Defaqto.
"So when a policyholder has reached the maximum discount available, I feel it is advisable to protect it."
This is a view shared by Niki Bolton from insurer Esure who said: "Adding a small premium - in the tens of pounds - makes sense if it could stop your
no-claims discount being reduced in the event of having to make a claim," she says.
Charges can vary considerably
However, while the potential premium hikes for those who don't protect their no claims discount may make paying for protect