Building up a no-claims period for your car insurance to get a discount is nothing new – but it’s a little known fact that some insurers will let you do this on your home cover too.
Out of 422 home insurance policies on the market, 100 will offer a no claims discount to new customers.
Meanwhile, 307 policies offer a no claims discount for all customers, according to data from Defaqto – but it is something many consumers aren’t aware of.
No claims discounts for home policies work in exactly the same way as they do for cars
With home insurance – both buildings and contents policies – you may be able to get a discount off your premiums if you have a no-claims discount.
For every year you don’t claim on your policy, you can build up the discount usually to a maximum of five years.
It works in exactly the same way as it does for car insurance, although the amount on offer varies depending on the insurer – and savings may not usually be as big as on more expensive motor policies.
When you apply for a new quote, you’ll usually be asked how many years of no claims you’ve built up (if not contact the insurer and ask). This is then used to calculate the new price, and in some cases an insurer might want to see proof of your no claims years, which you can get from your previous insurer.
MoneySuperMarket spokesperson Kevin Pratt, explains: ‘Having a no-claims discount can make a significant difference to the size of your home insurance premium. The longer you go without making a claim, the bigger your discount will grow.
‘For example, after one year without a claim, you might pay 10 per cent or 15 per cent less than you would do otherwise. After five years the discount could hit 40 per cent or 50 per cent, depending on the insurer. It won’t grow any further after that, even if you don’t make a claim in year six and beyond.
‘If you switch insurer at renewal to move to a cheaper deal, your new insurer will probably ask for evidence of your claims-free history. Your old insurer might supply this automatically, otherwise you’ll need to ask them to send it to you or direct to your new insurer.’
While Laura Hughes, senior policy adviser for the Association of British Insurers, adds: ‘No claims discounts are most common in car insurance but many home insurers will also offer discounts on your policy if you have a record of not making claims.
No claims discounts are most common in car insurance but many home insurers will also offer discounts
‘The discounts offered by different insurers will vary so it’s best to shop around at renewal to check you are being offered the right policy for your circumstances at the best price.
‘Plenty of insurers will also let you transfer a no claims discount built up with another company – you can use renewal documents which quote an existing no claims discount as evidence, or request confirmation of your NCD from your insurer direct. Any claim that you make is likely to be taken into account when considering your no claims history.
‘Although a no claims discount can help you save money on your home insurance, remember it’s also important to look at the cover you’re buying to make sure it suits your needs and gives you the right level of cover for the value of your home and belongings.’
After five years your discount could be used to cut 50 per cent off your yearly policy price
Insurers offer the discount because if you don’t make a claim, it saves them money and therefore works as an incentive for you not to claim on small incidents. If you do claim on your insurance, you will lose the no claims discount for that year – or in some cases the entire amount you’ve saved up depending on the insurer.
However, this shouldn’t put you off claiming if you need to. Insurance is designed to pay out if something happens and that’s what your monthly premium goes to.
Most insurers will let you protect the no-claims discount if you need to make a claim, by paying a small fee. This depends on the insurer and the length of the discount so if you’re in this situation it’s worth asking the insurer first.
The cost of insurance, and the difference in price between new and existing customers has hit the headlines repeatedly in the past year.
The average policy is now £118 a year, and those who do shop around and switch save an average of £43.
The average cost of combined buildings and contents insurance has remained stable over the past year, at an average of £118 for the first quarter of this year, down slightly from £119 at the end of last year.
Last week the Association of British Insurers and the British Insurance Brokers’ Association published a list of action points for insurers to follow to reverse the current system which sees existing customers paying significantly more than new ones.
It will apply to insurance policies of 10 months or more including home, motor and travel insurance but not pet or health insurance.
In two years’ time a report will be published by the ABI and BIBA to show how these guidelines have helped and to reveal how insurers have worked to tackle the difference.
This follows on from a rule change last April which means when insurers contact customers when their policy is up for renewal, they now have to list in a clear and prominent position how much the customer paid the year before.