So, you’re shopping around for car insurance because you’ve made the heroically adult decision to avoid paying to replace or fix up your car out of your own pocket. And because you know not to sign on the dotted line for the first quote you find, you’re doing some research to make sure that you’re getting your money’s worth. During your investigation, you might come across some insurers offering you a no claims bonus as 1 of the benefits of choosing their policy. This might get you thinking that with a no claim bonus, you’ve found the perfect cover.
But is a no claim bonus a true benefit? Do people actually get a massive pay-out? Should you be swayed by this addition to your policy?
We’ve gone to the trouble of finding out, so that you can make an educated decision when it comes to buying car insurance.
What a no claim bonus actually is
A no claim bonus, or an NCB as it’s known in the insurance biz, is a cash bonus that’s paid back to you for not claiming for a set period of time. Typically, this time period of not claiming lasts around 3 years or so. And it has to be consecutive years, with no breaks.
After these 3 years of being claim-free, you’ll get a prearranged percentage of your own money back.
A good example of how it works
Let’s say that the conditions of your NCB are that you’ll get 10% of your premiums back after 3 years of not claiming. You’ve been paying R500 per month for your car insurance and you haven’t claimed. Not once in 3 years. This means that you’ll get R50 multiplied by 36 months, which comes to R1,800.
That’s R1,800 paid straight back into your account, just for not having to claim.
Now for the serious talk
It does sound good. After all, it’s nice to get money back. But here’s the thing. The NCB bonus is meant to be a reward for driving safe and avoiding an incident for which you’d have to claim for. It’s not meant to discourage you from using your insurance for the exact reason why you’re paying for it in the first place.
But that’s what happens. Some people might avoid telling their insurer about little mishaps and fender benders in order to avoid losing their NCB. They could see the NCB as encouragement to not claim in order to get their ‘reward’. It’s kind of like an incentive not to claim. And if you do claim, then the cycle starts all over again and you have to wait another 3 claim-free years before you’ll get a pay-out.
Should it matter?
Ultimately, you need to think about the fact that theft, car accidents, and hi-jackings happen… Horrifically sad, but true. The chances of you not having to claim are rather slim.
So what, you might be asking? So you lose something that you weren’t saving for anyway? Hmmm, that’s not entirely true. Insurance companies must obey the laws and regulations set out by the Financial Services Board and to provide for your ‘no claims bonus’ within the parameters of what’s legal, your premium is somewhat inflated in the beginning to accommodate the pay-out. This increase, however minor, is then stored away. And you either get it after 3 years, or you don’t.
Potentially, you’ve paid more just to have the pleasure of the possibility of having this benefit. And it’s legal.
What should you do?
Look, this might still sound like a benefit worth having. You might have looked at your claims history and seen that you very rarely, if ever, lodge a claim, so you want a policy that comes with a NCB. And that’s ok. You need to make the decision that’s right for you and we respect that.
But you might also decide that the uncertainty of it all isn’t for you. If that’s you, then we can point you in the direction of an insurer who gives you monthly cash back, and it’s got nothing to do with making your premiums higher or not using your insurance for what it’s there for. We’re talking about an insurance company who decreases your comprehensive car insurance premiums every month in line with the depreciating value of your car so that you’re always paying an accurate premium for your cover. No strings, no catch, just insurance that’s fair and logical.
Why pay more for a possible pay-out when you could pay less right now? Click here for a commitment-free quote or dial 0860 50 50 50 to get in touch.