Premiums No-claims Bonus

All motor insurance is expensive, because traffic accidents and car thefts are becoming more and more commonplace and repairs more expensive. Naturally, the greater the hazards insured against, the higher the premium.

As with all general (non-life) insurance the premiums are calculated according to the insurance company's assessment of the degree of risk it is undertaking. Factors taken into consideration in making this assessment include the following.

(a) Make of car, and its type (e.g. saloon, sports, racing).

(b) Its overall size, weight and engine capacity.

(c) Where the vehicle is usually kept - in a locked garage or on the street, in a congested town area or in the country.

(d) The age of the driver, the length of time he or she has held a full driving licence, and his or her track record of accident-free motoring.

(e) Whether one named driver or any driver will be in charge of the car.

(f) The occupation of the insured person.

This list is not comprehensive. Different insurance offices employ different criteria for assessing risks. It usually pays to obtain quotations from several companies as most of them attach different degrees of importance to the various factors, which can result in their quotations varying considerably in each case.

No-claims bonus

Motor insurance, like any kind of general insurance, lasts only one year, at the expiry of which it must be renewed. But with motor insurance there is usually a 'discount' on the amount of the renewal premium if no claim has been made under the policy in the previous year. This is designed to minimise trivial claims as well as to favour the careful driver, and is similar in effect to an 'excess' clause. For example, if your first year's premium is £100 and the no-claims discount on the first renewal premium is quoted as 25%, you are unlikely to make a claim under your policy if somebody does less than £25 worth of damage to your car. It would be cheaper to pay for the repair yourself - unless, of course, you have another accident in the following week!

The scale of no-claims bonuses varies but most insurers offer 25% for one claim-free year, rising successively to a maximum of 60% discount after four or five claim-free years. A single claim in, say, the sixth year will usually cause your no-claims bonus to fall back two years on the scale.

• Motor Insurance
• Comparative Costs