What is a no claims bonus?

A no claims bonus is a system used primarily in insurance, particularly with car insurance, where policyholders receive a discount on their premium for not making any claims during a specified period. This approach rewards safe driving and encourages policyholders to be more cautious, as they stand to benefit financially by maintaining a claim-free record.

The no claims bonus usually accumulates over successive years of not making a claim, resulting in a more substantial discount as time goes on. This concept not only promotes personal responsibility but also helps reduce overall costs for both the insurer and the insured. The longer an individual goes without a claim, the more significant the potential savings, which is a compelling incentive for policyholders to avoid accidents and damage.

In the context of insurance, this differentiates the no claims bonus from penalties, insurance products, or fees associated with higher risk clients that do not primarily focus on rewarding risk-averse behavior.