We recently published a mini-series here on cheapvaninsurance.co.uk about ancillary products for your base van insurance policy entitled #vancillaries. One of the articles within those posts was an overview of whether or not protecting your no claims bonus was a viable option and indeed cost effective measure to take for your business.
In the first of today’s posts, we’d like to tag this article on as an addendum to that original piece, as there is new evidence to suggest that a protected no claims bonus is a worthwhile acquisition to your van insurance, but only up to a point.
One of the leading comparison websites has executed a real-time study using specific examples which suggests that, based on current costs and applicable savings, at some point between the second and third year of you paying extra to protect your no claims bonus, the cost of doing so actually starts eating into any savings you have made or could make further by taking out this additional safeguard to protect your investment.
Here’s an outline of just how they arrived at that conclusion, according to one recent report, using approximate figures and industry-accepted guidelines (some van insurance providers will differ, according to their sector).
First and foremost, a no claims bonus (or no claims discount) is the saving the insurer chooses to pass on to the van driver for a historical period of safe driving. The longer you stay claim-free, the higher the discount, usually up to a maximum qualifying period of nine years, where you reach your maximum saving. Any more it would be really cheap van insurance as they would probably end up giving you money. So, there’s a limit.
After five years of safe driving, it can become economical to protect that no claims bonus. You do not want to see those years of safe driving disappear because of one little incident and they want to retain your business by offering the cheapest van insurance to suit your circumstances, so they allow you to protect that saving.
However, the recent study suggests that the benefits of those savings become redundant when you draw a comparison with van drivers who make a claim and have not protected their no claims bonus.
This is because, even if you do protect your no claims bonus, you still pay a slightly higher van insurance premium in light of any claim. But it’s a lot less of an increase than a van driver would pay for their next policy if they’d not protected their no claims bonus. It is the difference between those two hikes in premium where moneysupermarket.com have found the point of equilibrium where protecting your no claims bonus no longer becomes a cost-effective expense.
Exactly when in that third year the imbalance happens will very much depend on the exact cost of your premium and how much you are protecting. But the conclusion is, according to their recent study, that the more time you go without making a van insurance claim once you have protected your no claims bonus, the worse off you become beyond the tipping point. I take their word on it. Definitely confused. Dot com.