The Value of Protecting Your No Claims Discount

Protecting the No Claims Discount (NCD) featured with car insurance coverage offers quite a financial value to the policyholder. Understanding exactly what it is and how to go about protecting it can save a policyholder quite a bit of money over time. Of course, the policyholder needs to earn this discount before he can protect it.

The No Claims Discount is achieved when a car insurance policyholder avoids making a claim in the previous year. Typically, this leads to a reduction in the cost of the next year’s insurance coverage. With each succeeding year, the size of the discount grows larger and the policyholder saves more money. While different insurers keep a variety of rules pertaining to the No Claims Discount offered with their car insurance, certain facts regarding the NCD remain constant.

The policyholder needs to maintain his no claims status for consecutive years in order to reap the benefit of extra savings. Plus, the increase in the discount eventually stops after a certain number of years have occurred. Some insurers invoke this aspect of the No Claims Discount after five years while other insurers offer a longer time period between seven and eleven years. After this time frame occurs, no further discounts can be taken from the cost of the car insurance cover. However, the value of the discount already earned generally continues to remain in effect provided no claims are made or the NCD has been protected.

Drivers who make a claim place their No Claims Discount at risk unless it has been protected beforehand. Typically, insurers allow their policyholders to protect their NCD after they have maintained a certain number of years without a claim. This number can vary, but in general, insurers require their drivers to have a minimum of four years without a claim before they are entitled to protect their NCD. In order to do so, the policyholder must pay an additional increase in the cost of their coverage.

For those who are unfamiliar with this process, a bit of explanation is helpful. Protecting the NCD attached to your car insurance coverage allows the policyholder to place one or two claims without risking the loss of his discount. It is important to understand that even when your NCD is protected, placing a claim generally leads to an increase in the cost of your insurance coverage. However, without the protection, the discount will disappear from the cost of the next year’s cover.

If the increase in the cost of the car insurance is small, it is a worthwhile investment to make. Since the protection allows a policyholder to hold onto the discounted cost of his insurance even if a claim is made, its cost can easily be recouped. It makes sense to protect this discount if the driver owns an expensive car or intends to purchase an expensive car in the near future.

Typically, the cost of car insurance coverage for high value, high performance, and grey import vehicles is greater than that designed for less expensive vehicles. That being said, if protecting your NCD raises the cost of your car insurance coverage significantly, then you might not want to do so.

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