No one sets out to be a dangerous driver, however, some people are just better, more careful drivers. If this is you, there’s money to be “earned”, so don’t leave it lying on the dashboard.
You can save a bundle if you know how to leverage your good driving record and make your No Claim Discount (NCD) work for you.
What is an NCD?
A No Claim Discount is exactly what its name suggests: a discount given on your insurance premium for the following year if no claims or accidents were made on the existing policy. Consider it a “reward” by the insurance company. After all, you’ve paid them for services that have gone unutilised. As each consecutive year passes with no claims made, your NCD will increase till a ceiling percentage is reached (this often depends on insurer and type of vehicle).
|Insurance period without any claims
||Your renewal discount
|5 years or more
In real terms if your insurance premium is $800 per year, at year 5 with a 50% discount you’ll only have to pay $400, a sizable amount saved.
For good drivers who’ve achieved a 50% NCD discount, being with an insurer that locks that discount in, or protects your NCD, could mean hefty ongoing savings on your motor insurance policy. There are several ways insurers use NCD as a way to attract or retain customers:
- FWD extends a 50% NCD for life so long as you continue to insure with them.
- Aviva provides an NCD Protector as an optional add-on that keeps your 50% NCD intact if only one claim has been made by yourself or a third party.
- Etiqa allows you to protect your NCD if it’s currently 30% or 40% (good for only one claim).
Managing your NCD
Finding our your NCD is a straightforward process, while it’s not available by any public free tools, your insurer can query the database for you. Do shop around for different quotes to see which policy fits you best. It’s also worth noting too that an existing NCD can be transferred to another vehicle (limited to one vehicle) if you have decided to go with a different insurer. Your NCD however cannot be transferred to another owner, only to a spouse but you will have to remain with the same insurer.
If there is a break in car ownership, your NCD can be kept for between 12-24 months depending on the insurer – a factor to consider when deciding who to go with – however, keep in mind proof of no claims are usually only valid for two years.
| Related: How to choose affordable car insurance to fit your needs |
How to avoid losing your NCD
Aside from the obvious i.e. driving safely and not getting into a crash, accidents happen and if they do, you can take steps to avoid losing your NCD discount. If the mishap is not your fault, put your third party insurance claim into action. If your windshield is cracked or broken, utilise the windshield provision within your policy.
Regardless of who is at fault, or how parties choose to settle (through respective insurance companies or privately) the accident, an official report has to be lodged within 24 hours otherwise your insurer has the right to reduce your NCD when it’s time to renew your policy. And as a last resort, depending on how much your NCD is worth to you if your insurance company pays out an accident claim you can reimburse them for repairs -- this will prevent them from penalising your NCD.
| Read more: Is an NCD protector worth the money? |
Protecting your NCD
While it can pay to stay with the same insurer, doing some homework before your policy expires is a useful comparison tool. Some insurers dangle big benefits and low policy prices to acquire new customers which can amount to some substantial cost savings.
Regardless, before confirming your choice, look at the NCD Penalty clause. While the market standard is to deduct 30% when you make an at-fault claim, Aviva’s Standard or Prestige plan offers a 10% NCD penalty deduction, the lowest in the market. This is an important consideration especially in the early years of owning a vehicle as the aim is to attain a 50% NCD status quickly. In some scenarios, your NCD could be reduced to 0% if you make more than one claim in a year.
Another attractive option is to go with an insurer like Sompo whereby a free NCD Protector is extended to individuals already holding a 30% and above NCD, together with the 5% Offence Free Discount (OFD), your NCD will be a decent 35%.
Now that you've learnt the ins and outs of NCD, make sure you shop around before renewing your next car insurance policy.