Is the no claims discount really worth protecting?

12/11/2012 04:26


The no claims discount, also known as NCD or no claims bonus, is a discount you get form your auto insurance company if you don't file any claims for a certain period of time. It goes up with each year you have stayed "clean", up to a total of five years usually (I've heard some insurers reward you for up to seven years, but I've yet to see the actual offers on paper).


Some people go above and beyond in an attempt to protect this. They choose to fix most of the minor car damages and fender benders on their own, rather than file a claim on their collision or comprehensive policy. But is it always worth it?


Let's assume you have a collision policy with a $250 deductible and pay $1,000 a year. (This isn't really an accurate quote, here's where you can learn more about actual car insurance quotes) You bump into a traffic pole and break the front bender. Repairs cost $500. Now let's also assume that you haven't filed a claim in two years, and get a 20% NCD, so this year's premium is of only $800. You have two choices:

  • File a claim on your collision policy, pay the $250 deductible and lose 10 percent points from the bonus, so next year's premium would be of $900.

  • Pay for the repairs in full in your favorite repair shop. Assuming you don't have another accident by the end of the year, next year's premium would be of $700.

If you pay for the repairs yourself, you will spend an extra $250 out of your pocket, but pay $200 less next year. I'd say a difference of $50 is well worth being eligible for another year's NCD, where you would be saving another $100. Moreover, $250 spent keeps you away from the hassles and the paperwork required when you're filing a claim.


This would seem like a reasonable scenario not to file a claim. Now do the math on your own for a $2,000 claim and a $5,000 one.