No claim bonuses - all you need to know

Let’s face it, no one can afford to not have their goods insured.

Things are far too expensive to replace on a whim if damaged or stolen. That being said, having insurance is vital to having peace of mind that our assets are safe.

While it’s clear that in today’s economy, we’re trying to cut costs wherever we can, insurance should not be one of those costs. Most people will, but then, most people need financial advice. Don’t be like most people! It’s true that an insurance policy is a grudge payment each month and we never enjoy the idea of it until that moment that it all pays off – when the unexpected happens and you need to put in a claim.

It’s important to understand the process of claiming through your insurance company, and that if you do claim, your monthly premium will go up. Not only does your premium rise, you are liable for an excess amount before you get anything processed. This excess is to deter people from claiming at the drop of a hat for anything and fraudulently claiming loss of goods that perhaps were never there in the first place.

So far, all that’s been mentioned is cost, a rise in premiums, and further payouts for claiming. It sounds expensive! But what if you diligently pay your insurance month in and month out for years and years and take care of your assets so well that you’re begrudging the premium more and more? Is there no reward from insurance for taking care of your insured items better than the others who claim? The answer is yes!

No-claim bonuses are becoming increasingly attractive

We all need to have insurance, but what do we get out of it if claiming costs us? You can be rewarded for not claiming. That way, by taking care of your assets, whilst keeping insured and not buckling under the financial pressure of your budget, you can actually earn money right back into your wallet.

How does it work?

A no-claim bonus is a financial reward for not claiming after three consecutive years. Each insurance company is different, therefore it’s common practice to shop around for the best no-claim bonus deals available. The most common percentage rebate is 10% of your premiums back. That’s a significant amount when you look at the cost-saving you have from not increasing your premium and paying an excess with claiming against your insurance.

Will I get a no-claim bonus in all likelihood?

That all depends on you! If you can go without claiming for three years then you will. If, however, you do put a claim in, the three-year cycle hits the reset button! You’ll need to wait a further three years without claiming before you can qualify again.

Be mindful of the fake no-claim bonuses

Fake? Yep, there are insurance companies out there that will actually inflate your premium if you sign up for the no-claim bonus package through their product offerings. By inflating your premium, they’re essentially using your own money to pay you back that elusive financial reward after the third year of not claiming. No claim bonuses have to adhere to the regulations and laws where finances are concerned. Make sure that you read the fine print and compare package offerings that include no-claim bonuses versus those that don’t. If there’s a difference in price, chances are, you’re being hustled.

Stay safe and stay insured. Don’t feel as though you’re just a pawn in the system by paying insurance each and every month, because the main thing is that when you need it most when the chips are down and finances aren’t great, the last thing you can afford to do is fork out an exorbitant amount from your own pocket. You won’t be able to, which will lead to borrowing money, which leads to added interest and ultimately could land you in some deep financial trouble.

The best advice is to have the cover and try and get something back while you’re at it!