Getting No Claims Car Insurance Discount: How it Works

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Article Contents
Picture of By <span>Aren Mirzaian</span>
By Aren Mirzaian

Updated on December 28, 2024

Visit author page
Picture of By <span>Aren Mirzaian</span>
By Aren Mirzaian

Updated December 28, 2024

Visit author page

4 minute read

Article Contents

Staying claims-free on your auto insurance policy promotes safer driving habits and signals to your insurer that you’re a lower-risk driver. But does this lower risk mean lower premiums as well – and can just one year of being claims-free make your car insurance more affordable?

Filing No Claims For a Year at a Glance

  • The longer you maintain a claims-free record, the larger your discount becomes. Most insurers offer increasing savings for each consecutive year without a claim.
  • Some insurance policies include accident forgiveness features that allow drivers to maintain their claims-free status even after a minor at-fault accident, preventing immediate premium increases.
  • Having a year of no claims can help stabilize or slightly reduce your insurance rates, but significant reductions typically require multiple years of being claims-free. This is due to the overall assessment done by insurers during the underwriting process.

Being claims-free is just one factor that car insurers take into account when calculating your auto insurance rates. Learn more about how no-claims bonuses work, what considerations affect your premiums, and strategies for lowering your auto insurance rates.

What Is a No-Claims Bonus?

A no-claims bonus (NCB) is a discount on your car insurance premium that you earn for each year you drive without making a claim. The longer you go without filing a claim, the larger your discount becomes. This system is designed to reward safe driving and reduce the overall risk for insurance companies.

How no-claims bonuses are calculated can vary between insurers. Canadian insurers generally follow a similar structure to this:

Year accumulation:

For every year you do not make a claim, you accumulate NCB points or years.

Discounts:

The discount percentage typically increases with each consecutive year of no claims, often capped at a maximum level (commonly around 5 years).

Transferability:

If you switch insurance providers or get a new vehicle, you can usually transfer your NCB to your new insurer or have it apply to your new car. If you’re planning to switch auto insurers, confirm with your new insurer about their policies regarding transferring NCBs from previous providers.

How Much Can My Car Insurance Go Down After 1 Year of No Claims?

On average, drivers may see their premiums decrease by 10% to 20% after one year of no claims. Some insurers may offer even more significant reductions if you maintain a longer streak of claim-free driving. However, your car insurance may still be higher or lower when you renew because of other factors that can affect your premiums such as:

Younger drivers tend to be charged higher premiums because of their perceived inexperience on the road. When drivers reach the age of 25, they may notice that their premiums suddenly lower. Then these premiums go up again when drivers reach their senior years, as drivers aged 65 and older have health issues due to aging that affect their driving and increase the likelihood of getting into a car accident.

Your car’s make, model, year, and value all affect your insurance premiums. If you drive a luxury car with parts that are harder to replace, your car insurance premiums tend to be higher than those for a more common and affordable make and model.

If auto accident rates go up in your area, expect your premiums to go up as well. This is because your insurer may deem

Apart from claims-free discounts, insurers often offer lower rates if you bundle your auto insurance with another policy like home insurance.

How Much Can My Car Insurance Drop After 1 Year of No Claims

Check with your insurer if they offer specific reductions based on a certain number of claim-free years.

Will My Car Insurance Premiums Go Down Every Year?

It’s normal for younger, less experienced drivers to suddenly see a drop in their premiums as they get older. Still, car insurance premiums don’t automatically drop every year, and they may even increase because of these reasons:

Insurance rates can change depending on market conditions, such as the cost of auto repairs, phasing out certain vehicle types, or the frequency of accidents in your area.

Changes in your personal circumstances, such as moving to a higher-risk area or changes in credit score, can also affect your premiums negatively.

Each insurer has different policies regarding how they calculate premiums and apply discounts. Some may offer immediate reductions upon renewal after a claim-free year, while others might take longer or require multiple years of no claims for significant reductions.

While maintaining a clean driving record typically leads to lower rates over time, this alone doesn’t guarantee that you’ll have cheaper car insurance when it’s time to renew.

What Can I Do to Lower My Car Insurance Premiums?

Avoiding claims on your car insurance policy is one way to eventually lower your rates. If you’re trying to keep your car insurance premiums affordable, here are other effective tips you can try:

Shop around:

Use an insurance aggregator like MyChoice to quickly compare quotes from multiple car insurance providers, as rates can vary significantly between companies.

Increase your deductible:

Opting for a higher deductible can lower your premium. Just ensure you can afford the deductible amount in case of an accident.

Improve your credit score:

In many provinces, insurers use credit scores as part of their risk assessment process. A better credit score can lead to lower premiums.

Bundle your insurance policies:

Many insurers offer discounts if you bundle multiple policies. If you already have life or home insurance, consider getting auto insurance as well if it’s offered by the same provider.

Take advantage of other special discounts:

A no-claims bonus discount is just one of the different special reductions that car insurers can offer. Look for available discounts such as safe driver discounts, low mileage discounts, or loyalty discounts for long-term clients.

Key Advice from MyChoice

  • Review your car insurance coverage and premium rates at least once a year. As your circumstances change – say a new job or a new car – your insurance needs may change as well.
  • Communicate with your auto insurer. Don’t hesitate to ask questions or seek clarification about how premiums are calculated and what discounts might be available to you.
  • Car insurance regulations can change at both provincial and federal levels. Staying informed helps you understand how these changes might affect your coverage and costs.

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