No-claims bonus (NCB)
Each year you have a policy but don’t make a claim, you gain another year’s NCB, sometimes known as a no-claims discount (NCD).
A reward for enjoying each year of claim-free driving, it's this discount which makes insurance increasingly affordable as after five or six years your insurer should give you a discount of up to 65% - some even go as high as 70%, although this is rare.
Once you’ve proved that you’re a good driver, you can even protect your no-claims bonus so that it’s not lost in the event of a claim.
However, a common misconception is that because you've got a protected no-claims bonus, your premium won't go up the next time you renew your insurance. Sadly that's not the case as you can still expect a premium increase - especially if you're making an at-fault claim. But the premium increase should hopefully be less than if you didn't have that protection.
Your excess is the contribution you’ll have to make in the event of a claim, before your insurer pays out anything. The excess is there to stop people making trivial claims; as it’s usually set at no less than £100, if you scrape your bumper and the bill is £150 to patch it up, it’s hardly worth putting in a claim.
You can normally choose the level at which your excess is set; the greater your excess, the lower your premium. However, new drivers tend to have the excess set at quite a high level (often £500 or more) by their insurer, as the chances of a claim being made are high.
It's easy to assume that it's a good idea to opt for the biggest excess on offer, to keep your insurance premium as low as possible. But as this news story relates, taking this route really isn't a good idea...