I read this article in the DT concerning protected NCB's. As someone who does protect their NCB am I being ripped off ?
Has anyone had the misfortune of proving whether the theory below is indeed correct ?
I would be grateful for your views.
Protecting a no-claims bonus doesn't make money
Paying to "protect" your no-claims bonus is a complete waste of money.
This protection can push insurance costs up by 10 per cent a year. But many drivers pay this assuming it means the cost of their car insurance will be largely unaffected if they make a claim.
Big mistake. What insurers fail to point out is that your car insurance premiums will soar following a claim, regardless of whether you have "protected" your no-claims bonus or not.
All you have bought is a guarantee that the same discount will be taken off the annual premium. Rather than pay to protect your no-claims bonus, save this money to pay for small claims yourself to avoid claiming on your insurance where possible.
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>Protecting a no-claims bonus doesn't make money
I agree completely. I've a couple of friends who found this out the hard way, but they still persevered with paying for the 'protection' because of the continued discount they received.
I treat insurance like bookmakers, I think they're in the same business. I never use the latter, and use the former as little as possible.
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I knew this is what happened. I have never protected mine, because as they say it's expensive.
I have had one claim which reduced my NCB by two years. When renewal time came the quote from my existing company was about 50% more than it had been before the claim (IIRC it went from about £400 to £600). I shopped around and found insurance for the year for less than £400 anyway.
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Big mistake. What insurers fail to point out is that your car insurance premiums will soar following a claim regardless of whether you have "protected" your no-claims bonus or not.
And what this article fails to point out is that it will go up much more without the protected no claims.
It's not hard to work out. Without the protection the premium will rise by the same amount based on risk, but will also now not have a discount applied to it.
As for whether protection is worthwhile - well the insurance companies wouldn't do it if they didn't make money from it, so clearly on an average basis it is not worthwhile. But I'd hate to be hit by that double whammy one day, so I think I'll continue to pay the £20-ish a year it costs me to protect (I don't think that would add up to many repairs!)
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Im with Bazzabear on this one. I have first hand experience of it. I had an accident in Feb 2005 in a blizzard, and my car was written off. I had the protection in place, and the next policy I took out for an identical car was slightly more, due to the increased risk, but would have been a further 20% ish more had I not had the protection. Also to build up the 2 years per claim they take off you would take a further 2 years to get the level of discount you recieved before.
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Call me cynical, but I don't believe insurance companies would offer it unless they made money out of it. I am certain of this.
It's true that they may make money from it indirectly (e.g. the offer of them protecting your no claims could entice new customers in) or whatever. Obviously, if you don't have an accident where you'd lose your NCB, you'll end up well out of pocket over the years. If you put all the money you'd pay extra for NCB protection in a bank over 10 years, and you had one accident in that time that cost you your NCB, you could use the money in the bank to pay the extra premium and still have money left, I'm sure.
It's good for people who think they might crash a lot.
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I used to protect my NCB - roughly £20/yr /car i.e. £40 / year.
I no longer do so as I am on the Esure increased NCB - 70% after 5 years and as I have been with them 6 years they give another 1% for another 5yrs until it is 75% off.
If I make a claim it falls from 75 to 73% - i.e. about £16.
Faced with definitely spending £40 or possibly spending £16 for a claim it was an easy decision.
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The people who are most likely to be ripped off are those who don't bother to shop around every year. Suits me.
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I went completely bonkers and got ?Guaranteed? NCB on both mine and my wife?s cars (with Liverpool Victoria / Frizzell) so we can make as many claims as we like! I also got the minimum possible excess.
I do understand that the basic premium could rise, but we?ve had one her fault and one the 3rd parties fault claims and neither seemed to affect the premium unduly (I?m pretty sure it?s been cheaper every year ? it certainly came down quite a bit this year).
Where do you draw the line on these things? At the other extreme, you could go 3rd party only (quite a number of large companies do that with their company cars apparently).
Having a big excess (like £1000) can make the premium a lot lower, but if my car suffers several hundred pounds of damage then I don?t want to be put off making a claim.
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I suspect a protected no claims is a sharp practice, it makes the policyholder feel 'tied' to renewing with their company because to go elsewhere would mean losing that protection. Whether or not this is the case in reality I don't know, but I'd be surprised if a lot of people didn't stick with their current company for this reason.
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That is not the case. The no claims discount is applied with other companies. They will check you had it protected at the time though. I switched companies since my claim with no issues
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If you did not have protected NCD and had to make 2 claims in 1 year your premium would soar. The claims might not even be your fault. E.G Theft or vandalism or even hit by third pary in a car park who did not leave their details.
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I work for an Insurance company that allows 3 claims in 5 years before you lose you NCB adn if you pay the extra 12.5% for protection we will not load your policy.
however there are Insurers out there that will offer you protected bonus for life. these are the ones that start loading your policy if you have claims. How else will they make their money back???
Anyway, as a worker in the motor insurance industry, I would never have a policy without protected NCB now.
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