What is a protected no claims bonus?

A no claims bonus is a rebate of premium given to an insured person where no claims have been made, and it is very common in motor insurance¹. You build it up one claim-free policy year at a time: the Financial Ombudsman Service says an extra year of no claims bonus is only added if you have not had any claims in the policy year². One insurer, NFU Mutual, sets out a discount of 30% after one year without a claim³.

Protection is an optional extra. By paying an additional premium, you can protect your no claims discount, meaning you can make a claim without losing the bonus you have built up⁴. What protection does not do is freeze your premium. The Financial Ombudsman Service is explicit: in a lot of policies, a protected no claims bonus means the amount of your bonus will not change if a fault claim is recorded, but this does not mean the price is protected².

So the honest answer to what protection buys is narrower than the name suggests. It protects the discount percentage, not the amount you pay. This page sets out how the bonus builds up, what protection costs and covers, who can buy it, what happens when you claim, and how to complain if your insurer applies it wrongly.

What a no claims bonus is and how it builds up

A no claims bonus, also called a no claims discount, is a rebate of premium given to an insured person by an insurer where no claims have been made by that insured, and it is very common in motor insurance¹. It is not a separate pot of money and it is not a savings product. It is a discount applied to your premium, and it exists only as long as your insurer's records show the claim-free years behind it.

It builds up in whole policy years. The Financial Ombudsman Service says an extra year of no-claims bonus is only added if you haven't had any claims in the policy year². That has a practical consequence for anyone who switches insurer or cancels partway through a year: the ombudsman says it would not expect an insurer to award a no-claims bonus for a full year if a customer has not completed the whole year on that policy, giving the example of a 12 month policy cancelled after 11 months⁶.

You can only hold one bonus at a time. The ombudsman says you will only have one no-claims bonus entitlement, which you can only use on one vehicle at a time². That matters in a two-car household: the bonus cannot be applied to both cars at once, and the ombudsman says the premium on a first vehicle should only increase if the customer transfers the no-claims bonus to a second vehicle⁶.

The bonus is also not the only lever on your premium. Premiums may be reduced by parking in a garage or driveway, Thatcham-approved security devices, low annual mileage, a cheap-to-repair popular model, advanced driving training such as Pass Plus, paying annually, and a no claims discount⁷. Classic car policies often work differently again: Which? says insurers often give a discount on the premium in other ways, for example if you limit your mileage, rather than through a no claims bonus⁸.

No claims discount rates: from 30% after one year

There is no national table of no claims discount rates. The Financial Ombudsman Service says the amount of discount for a no-claims bonus isn't set; it varies between insurers². That is the single most important thing to understand before comparing protection offers: the same number of claim-free years can be worth a different percentage at different firms, and the percentage is not regulated.

Where insurers do publish a scale, it starts at the first claim-free year. NFU Mutual sets out a discount of 30% after one year without a claim³. The same 30% figure appears in its van and motorhome material⁴. No full published scale beyond that first step is available, so any figure for year two, three or five would be a guess.

What the ombudsman does describe is the step back after a claim. It says an unprotected no claims bonus is normally reduced by 2 years after a fault claim, and gives the example that if you had 4 years unprotected no-claims bonus and you have a fault claim, your no-claims bonus will be reduced to 2 years². It adds that most insurers step back from 5 years even if you have more no-claims bonus than this, so in most cases this will mean you getting 3 years no-claims bonus².

Protection keeps your bonus, not your premium

The distinction that catches people out is between the bonus and the price. The Financial Ombudsman Service puts it plainly: in a lot of policies, a protected no-claims bonus means the amount of your no-claims bonus won't change if a fault claim is recorded, but this doesn't mean the price is protected². Your premium is calculated from a wide range of rating factors, and a fault claim can feed into those even where the bonus percentage itself is untouched.

The same pattern appears in other insurance lines. Which? says that with most private health insurers, if you claim, your premium will probably go up as a result, even where a no-claims discount exists⁹. Motor insurance is not unique in separating the discount from the price.

Protection is bought for an additional premium, and that premium is paid whether or not you ever claim⁴. So the arithmetic a consumer is weighing is: the extra cost of protection each year, against the value of the bonus that would be lost if a fault claim were made. Because the discount percentage varies between insurers², the value of what is being protected varies too.

There is one situation where the bonus is protected without buying anything. NFU Mutual states that on its motorhome insurance, no claims discount is protected if you are hit by an uninsured driver, with no excess to pay, subject to providing the uninsured driver's details and vehicle details and any independent witnesses¹⁰. That is a term of that particular product, not a market-wide rule.

Who can protect a no claims bonus

Protection is sold as an optional extra on motor policies, and it is bought by paying an additional premium⁴. No single eligibility rule applies across the market, and the Financial Ombudsman Service does not publish a minimum number of claim-free years before protection can be bought. Insurers set their own terms, so the qualifying period is a question for your own insurer.

What the ombudsman does confirm is that insurers may cap what can be protected. It says some insurers may limit the number of no claims bonuses you can have². That is a limit on the bonus itself, and it feeds directly into what protection is worth: if your insurer caps the bonus at a certain number of years, protection cannot preserve more than the cap allows.

The number of claims protection will absorb also varies. The ombudsman notes that some insurers may limit the number of no claims bonuses you can have², which points to policy-specific limits rather than a market standard. One provider, MortgageSafe, states an unlimited number of claims on its product¹¹. That is a single provider's term and not a general rule.

Two structural limits apply to everyone. You hold only one no claims bonus entitlement, usable on one vehicle at a time². And a bonus is only awarded for a completed policy year, so a mid-term switch does not carry a part year across⁶.

Claiming or paying yourself: protecting your discount after an accident

The cheapest way to protect a no claims bonus is not to claim at all. Which? says you do not have to submit your claim to your insurer if you pay for repairs yourself or recover them from the other driver, and that this is a route to preserving your no claims discount¹². Citizens Advice makes the same point from the other direction: you might lose your no claims bonus if you claim for garage damage on your car insurance¹³.

Reporting an accident and claiming are two different things. The Financial Ombudsman Service says that where a customer reported an accident but paid the other person themselves instead of claiming, the claim should be recorded as notification only, and there shouldn't be any reduction of their no-claims bonus⁶. So telling your insurer what happened does not, by itself, cost you the bonus.

Fault is the pivot. The ombudsman says that if it has been found that you weren't at fault for the accident by the renewal date, your no-claims bonus won't be affected, regardless of whether the claim is closed or not². It adds that your insurer should only treat a non-fault accident as a claim if they receive a claim from the other driver, or third party².

Where a claim is settled in your favour, the effect on the bonus should be temporary. The ombudsman says that if a claim is settled in the policyholder's favour, a reduction in no-claims bonus should only last until the claim is settled⁶.

Will my premium still go up if I claim with protected no claims?

Yes, it can, and this is the point most often missed. The Financial Ombudsman Service says that in a lot of policies a protected no-claims bonus means the amount of your no-claims bonus won't change if a fault claim is recorded, but this doesn't mean the price is protected². The bonus percentage and the premium are two separate things, and protection only touches the first.

The reason is that premiums are rated on more than the bonus. The ombudsman's own guidance on two-vehicle households shows how carefully it separates the two: it says it would only expect the premium on a first vehicle to increase if the customer transfers no-claims bonus to a second vehicle⁶. In other words, the bonus position drives the premium outcome, and moving the bonus is what moves the price.

The same separation shows up elsewhere in insurance. Which? reports that with most private health insurers, if you claim, your premium will probably go up as a result, even where a no-claims discount applies⁹. The pattern is that a claim is a rating factor in its own right, independent of any discount.

For a consumer, the practical consequence is that protection should not be bought on the assumption that a claim will be cost-neutral. The extra premium for protection is paid every year⁴, and a fault claim can still affect the price at renewal even where the bonus survives. What protection does is keep the discount percentage intact, which is a narrower benefit than the name implies.

What a no claims bonus is worth, and where it stops

The value of a no claims bonus is not fixed, and neither is the value of protecting it. The Financial Ombudsman Service says the amount of discount for a no-claims bonus isn't set; it varies between insurers². Two drivers with identical claim histories can hold bonuses worth different percentages, and the same driver switching insurer can find the bonus revalued.

The step-back rules set the ceiling on what protection saves. An unprotected bonus is normally reduced by 2 years after a fault claim². Most insurers step back from 5 years even if you have more bonus than that, so in most cases a claim leaves you with 3 years². That means the maximum a fault claim can cost an unprotected driver, in bonus terms, is the difference between their current step and the step they land on.

There are also limits on how much bonus can be accumulated in the first place. The ombudsman says some insurers may limit the number of no claims bonuses you can have². And you can only use one entitlement on one vehicle at a time².

Where a claim is settled in your favour, the reduction should not be permanent: the ombudsman says a reduction in no-claims bonus should only last until the claim is settled⁶. And where you reported an accident but paid the other party yourself, the claim should be recorded as notification only with no reduction of the bonus⁶.

Complaints and where to get help

If an insurer applies a no claims bonus unfairly, the Financial Ombudsman Service can look at it. The ombudsman says it does not think it is fair for an insurer to withhold a no-claims bonus you have earned, though it might not interfere if the insurer has done this because you owe them money². Where protection has been applied unfairly, the ombudsman says it will probably tell the insurer to refund any extra money the customer has paid⁶.

Complaining costs nothing. Business Debtline states that it costs nothing to complain to the Financial Ombudsman Service, and that you can also call them for free if you need guidance⁵. The ombudsman's own complaints data for Q1 2026/27 records 126 complaints opened about business loans not secured on land, which gives a sense of the scale of casework it handles across financial products¹⁴.

Before the ombudsman, the insurer gets a chance to put things right. The ombudsman sets out the evidence it would normally expect to see in a fault claim and no-claims bonus complaint: policy schedule, policy certificate, full policy terms, contact records, claim forms and notes, a timeline of what has happened, engineer or expert reports, and vehicle valuations showing registration number, mileage and which guide⁶. It also says it would usually consider it reasonable for an insurer to give a customer a letter setting out the amount of no-claims bonus they started the policy with, the business maximum, and how the bonus has been affected after a claim⁶.

If the complaint is about a claims management company rather than an insurer, the route is different. GOV.UK says you can complain to the Financial Ombudsman Service if you are unhappy with the service you have received from a claims company, for example the results of your claim or the fees they have charged you¹⁵. The Claims Management Ombudsman describes itself as a free service set up by Parliament to resolve complaints¹⁶.