Good drivers are offered a No Claims Discount (NCD) on their insurance – a reduction in price to reward their accident-free driving.

If an accident happens, you would expect to claim on your insurance, but it is not always a good idea – especially for repairs to your own car.

For example,
Premium £840
NCD 40%

10% of £840 = £84
40% of £840 = 84 x 4 = £336 (this is your NCD)

So the insurance cost will be £840 - £336 = £504.

Suppose you have an accident doing £200 worth of damage. If you pay out of your pocket, you will lose £200.

Your insurer tells you that if you claim on your insurance your NCD will reduce from 40% to 10%.

Your next insurance bill would have a NCD of only 10%, so you would pay

£840 - £84 = £756 for next year’s insurance bill

So you would lose £756 - £504 = £252.

If you pay for the damage yourself, it costs you £200.
If you claim on your insurance it costs you £252.

It makes sense to check this out first.
In reality, the situation can be even worse: It may take several years to earn your NCD back and you will be paying extra each year until you do.

Also, many insurance policies have an excess in the small print. This may mean that you have to pay the first £100 of the claim out of your pocket anyway.

In the case above, that would mean you would pay £100 cash and lose £252 on next year’s insurance bill: £352 in total for a £200 repair – and that’s if you only lose your NCD for one year!

If you have a major accident, you will have to make a claim, but next time you have a little bump, check your policy carefully, it may be cheaper to pay up front.