Paying to "protect" your no-claims bonus is a complete wate of money?

phoebe03cat

'Paying to "protect" your no-claims bonus is a complete waste of money.
This protection can push insurance costs up by 10 per cent a year. But many drivers pay this assuming it means the cost of their car insurance will be largely unaffected if they make a claim.
Big mistake. What insurers fail to point out is that your car insurance premiums will soar following a claim, regardless of whether you have "protected" your no-claims bonus or not.
All you have bought is a guarantee that the same discount will be taken off the annual premium. Rather than pay to protect your no-claims bonus, save this money to pay for small claims yourself to avoid claiming on your insurance where possible.'
Quote from the Telegraph today

We've always protected. Would appreciate any light shedding on this please - is this right?

YorkshireBoy

Telegraph wrote:

Rather than pay to protect your no-claims bonus, save this money to pay for small claims yourself to avoid claiming on your insurance where possible.

At only £20 per year (my protected NCB premium), it'll take a heck of a long time to build a 'small repair' fund won't it?

darich

phoebe03cat wrote: »

'Paying to "protect" your no-claims bonus is a complete waste of money.
This protection can push insurance costs up by 10 per cent a year. But many drivers pay this assuming it means the cost of their car insurance will be largely unaffected if they make a claim.
Big mistake. What insurers fail to point out is that your car insurance premiums will soar following a claim, regardless of whether you have "protected" your no-claims bonus or not.
All you have bought is a guarantee that the same discount will be taken off the annual premium. Rather than pay to protect your no-claims bonus, save this money to pay for small claims yourself to avoid claiming on your insurance where possible.'
Quote from the Telegraph today

We've always protected. Would appreciate any light shedding on this please - is this right?

Let's have a look.
Your car insurance is £1000 but you have 50% NCD and protect it - it costs you £500 for the policy. During the policy you have to make a claim but because you've protected your NCD you retain the 50% discount. The premium will rise, let's say to £1200 but with your 50% discount it costs you £600 the next year.

OR

Your car insurance is £1000 but you have 50% NCD so only have to pay £500 and decide not to protect it. During the policy you have a claim and the insurance pays out. I think I'm right in saying that every claim costs you two years NCD. So that claim means you'd drop back to something like 30% discount. Not only that, the premium goes up to £1200.
So you now only get 30% discount on a larger premium. 30% of £1200 is £360 so you end up paying £840 (70%) because you didn't want to pay the extra £50 when you renewed.

So the telegraph is advising saving the £50 incase you have a bump and use it for repairs? Does the Telegraph know how much bodywork costs to repair?

I always protect my NCD and will continue to do so for as long as i have the option.

Biggles

Hmm, now let me see: the question is, 'do the insurance companies offer a discount/bonus protection for which they charge far less than it is worth?'.

Or will they put the price up to cover themselves if you're becoming a risk, irrespective of any 'protection'?

Ooh, it's a tough one!

advantix

Apart from the above answers. If you have an incident you are legally obliged to inform your insurance company if you are involved in an incident even if you do not make a claim on your insurance so your premium may be increased anyway. So in my opinion the small amount i pay to protect my NCD is worth it.

System

ive just taken out the 1st ever policy with me as the main driver so i have 0 NCD ,i am paying only £20 more than my husband who has 9+ years NCD !

phoebe03cat

Thought it was all clear ChrissyG until you posted. That's interesting, presume car etc and all other variables remain the same?

MarkyMarkD

The Telegraph is trying to make a valid point, but getting it wrong.

The reason it's not worth paying for NCD is not because you should use the money saved to "build up a repair fund, and then not claim". The reason it's not worth paying for NCD is because you should use the money saved to pay the additional premium, in the event that you make a claim and hence push up your gross premium.

I don't accept the Telegraph's 10% figure, by the way - it's typically 15%.

So, using darich's figures (for which, thanks), but correcting a fundamental flaw which is that you can only purchase NCD protection when you already have maximum NCD:

Without NCD protection

Premium £1,000 less 60% NCD = £400.
Claim incurred. So next year, premium £1,200 less 40% NCD i.e. £720.
Following year, premium £1,200 less 50% NCD ie £600.
Then back to 60% NCD ie £480.

Total premiums over the four years (the year of the claim and the following four years) = £500+£720+£600+£480 = £2,300.

With NCD protection

Premium £1,000 less 60% NCD = £400 + 15% = £460.
Claim incurred. So next year, premium £1,200 less 60% NCD i.e. £480 +15% = £552. And the following 2 years are the same.

Total premiums over the four years (the year of the claim and the following four years) = £460+3*£552 = £2,116.

It would take a further 2.5 years to reach break-even.

So, if you expect to claim at least once every 6 years, you win by taking NCD protection. If you expect to claim every 7 years or less frequently, then you lose by taking NCD protection.

All of this assumes standard NCD percentages of 30, 40, 50, 60. Some companies add another tier, at 65%, which means that the adverse impact of not having protection is less (because you go down from 65% to 50% instead of 60% to 40%). And esure's tiers are even better as they go up to 75% with 6 extra tiers - 30, 40, 50, 60, 70, 71, 72, 73, 74, 75 - so you lose next to nothing by not protecting.

I am insured with esure and I don't protect my NCD. Anyone who is with esure, getting 75% NCD (or indeed anything over 71% IMHO), and who does pay to protect it is a muppet.

As Biggles says, insurers only offer NCD protection because they make money out of it. But that's a slightly strange equation because one insurer can give you the protection (and take the premium) whilst another insurer ends up giving you the discount in a subsequent year. It's very strange, in fact.

Money_saving_Martyn

CHRISSYG wrote: »

ive just taken out the 1st ever policy with me as the main driver so i have 0 NCD ,i am paying only £20 more than my husband who has 9+ years NCD !

Sounds like he is a very high risk, either because of the car, his claims history or job title - or he needs to get on this website himself!!!

I personally disagree with the principle of protected no claims, after all, if there was a constant threat that your insurance would go back up to £1500, people might drive a bit more carefully! My attitude will no doubt change if I'm on the receiving end of an increased insurance bill....

Despite this, of course, I have my NCD protect, because it's there. (Now I can cause accidents and still keeps lots of lovely years of no claims....)

It cost me about £50 to protect them, as others have said. When a simple body repair (like to a rear quater panel) can cost from £600 upwards, I'm not sure you can ofset the cost of one against the saving from the other.

I think (no expert) that even though you have to tell your insurance company if you have an accident, surely it doesn't count as a claim if you pay for it yourself.... it's called a no claims discount, not a no accident discount.... just a thought. Maybe there's someone in insurance here....

Before I go, do you think you're a good driver? Why not get in touch with your local IAM group and put your driving to the (advanced) test! http://www.iam.org.uk . People how have taken this training are statistically less likely to have an accident (by 50% I believe). No having accidents is surely the best way to keep the cost of insurance down!

Stay safe out there!

Money_saving_Martyn

MarkyMarkD wrote: »

So, if you expect to claim at least once every 6 years, you win by taking NCD protection. If you expect to claim every 7 years or less frequently, then you lose by taking NCD protection.

Hmmm. So we should just all plan to only have an accident every 7 years. I'll book mine now! Can it be against a blue F reg Mini please? Slight flaw in the logic there, but otherwise a good explination, thanks!

Nobody "expects" to claims because everybody is a "good" driver.... and because we don't expect to claim and we're all good drivers we don't really need insurance.... but it's here, we have to take it out and people have accidents unexpectedly. Fact.

MarkyMarkD wrote: »

but correcting a fundamental flaw which is that you can only purchase NCD protection when you already have maximum NCD:

I only have 4 years no claims and it's protected. Next year I'll have 5 years no claims....

MarkyMarkD

Money-saving_Martyn wrote:

I think (no expert) that even though you have to tell your insurance company if you have an accident, surely it doesn't count as a claim if you pay for it yourself.... it's called a no claims discount, not a no accident discount.... just a thought. Maybe there's someone in insurance here....

Your gross premium will increase, sometimes, even for a "no blame" accident. But your NCD won't be impacted unless you have a claim for which your insurer doesn't recover the loss.

Money-saving_Martyn wrote:

Hmmm. So we should just all plan to only have an accident every 7 years. I'll book mine now! Can it be against a blue F reg Mini please? Slight flaw in the logic there, but otherwise a good explination, thanks!

It's not a flaw in the logic. You can estimate how frequently you expect to have an accident. I haven't had a blameworthy claim in 15 years, so I am pretty happy to go without NCD protection. Others have blameworthy claims every 4 or 5 years. By the time you've built up enough NCD to protect it, you must have some sort of idea how likely you are to claim.

Money-saving_Martyn wrote:

I only have 4 years no claims and it's protected. Next year I'll have 5 years no claims....

But your 4 years no claims already entitles you to the maximum discount, doesn't it? For insurers like that, any number greater than 4 is effectively the same as 4.