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A No-Claims Discount rewards you if you don't make any claims on your car insurance policy for a year or more. Here's a guide on how NCD can affect your insurance premium.
Category: Car Ownership Advice
With various car insurance terms used, many car owners can easily get confused. There are also factors that can cause expensive insurance premiums, too.
And if you don't compare when shopping for insurance, you can end up paying much more for effectively the same coverage.
There are many ways to save on car running costs when it comes to ownership, and one of the first steps is understanding your insurance policy. With that, lets talk about one particular car insurance term; NCD.
What is NCD for car insurance?
No-Claims Discount, or NCD, is a discount that you, the policyholder, earns if you do not make a claim during a full policy term. A policy term usually lasts for 12 months, and you'll earn a 10% discount each year.
Hence, if you terminate your car insurance before 12 months, you will not receive any NCD that you were set to earn by the end of the policy term.
Some insurance companies may use different names to describe NCD, such as NCB, or No-Claims Bonus. They're effectively the same thing.
The discount generally maxes out at 50% for private cars. Some insurers offer discounts on top of your NCD. DirectAsia, for example, offers an additional 10% discount if you've held on to your 50% NCD for five consecutive years. With it, you will technically have 60% NCD.
How do I earn NCD on my car insurance?
It's easy. Just have insurance coverage for a full policy term, and you'll earn a discount for the premiums in the following year. Simply put, if you have not made any claims against your own car insurance for a year, you will earn a 10% discount each year. Keep it that way for the next five years, and you'll earn yourself a handsome 50% NCD.
Of course, you'll need to be the owner of insurance policy at hand.
Will I lose my NCD in an accident?
One of the most common myths with car insurance is that if you're caught in an accident that isn't your fault, you'll lose your NCD when you make a claim. This is not true.
Losing your NCD only applies when you make a claim in an accident when you're found to be at fault, according to the Barometer Of Liability Agreement (BOLA). Insurers follow BOLA to determine if you are at fault during an accident with other vehicles. A liability of 20% or less means you can make a claim without affecting your NCD.
But even if you are found to be at fault, it doesn't mean you'll lose all of your NCD at once.
Generally, insurers will take 30% off the NCD that you've earned upon making a claim.
So if you have 50% NCD, you'll be left with 20% NCD once you make a claim. Make a second claim within the same year, and your NCD drops to 0%.
But it doesn't mean all claims against your insurance policy will result in a reset of your NCD. Making a claim on your windshield for example, will generally not affect your NCD.