March 1, 2022

By now, you’ve probably seen an Australian ad for an auto insurance company in Australia offering a no-claim bonus discount if you don’t make a claim within a certain period, normally a max of 5 years, but do you know the whole story about no-claim auto insurance bonuses?

Probably not. Here are some of the important things to know.

#1. Auto Insurance companies in Australia use a rating system to calculate your No-claim bonus

A no-claim bonus is used by insurance companies to encourage safe driving, and since it costs the insurance company much less to insure your vehicle, they pass on the discount via lower auto insurance rates, which can in some cases, amount to up to 60 percent discounts.

However, insurance companies are cautious about how they issue these bonuses.

Let’s say for example that for a couple of years you had auto insurance with Koala Insurance Company (a fictional name) and then you switched insurance companies to
Vegemite Auto Insurance LTD (also a fictional name.)

When Vegemite issues your insurance policy, they will contact your previous insurer to calculate your bonus rating.

Typically you are rated with a bonus rating of 1 to 6, and those with a 1 have not made a claim for 5 years. Meanwhile, those with a 6 will get a much smaller discount.

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#2. No claim bonuses are almost exclusively given to those with comprehensive insurance.

Let’s say you are in love with your 1972 Volkswagen Beetle, (worth perhaps $500) and plan to keep it as long as it runs.

That’s great, but if you only elect to buy the minimum liability insurance allowed by law, you will not get any type of no claim bonus at all, regardless of what a great driver you are. And this makes perfect sense. Minimum liability is required to protect other drivers.

#3. No claims bonuses are only on a specific vehicle or vehicles.

Let’s say you drive a 2020 model Nissan Micra, one of the cheapest cars in Australia, priced at around $13,000

Then in 2022, you trade it in and purchase a new Toyota 2022 Toyota Hilux Rugged X (4X4) at around $87,000. Your insurance company may keep your safety rating in place, but common sense will tell you that not only will you pay more comprehensive insurance for a 2022 Hilux, but the discount may not even be as much as when you were driving the Nissan Micra.

Why? Because different vehicles have different safety ratings, so even if you purchased a vehicle of around the same size and class as your previous vehicle, some vehicles statistically have more accidents, or the replacement parts for bodywork is significantly higher.

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You can obtain a tailored car insurance quote from Insurance Company and before you buy a new vehicle check not only the overall comprehensive insurance coverage costs but inquire what kind of no claim bonus you will be offered.

#4. Some companies let you pay extra so you can make a claim and still keep your
no-claim bonus intact.

Here, this is a numbers game. If you are very cautious, paying a little more to be able to make a reasonable claim may be in your best interest.

Just be sure you are able to justify the difference.

For example, if you are a driver that has a rating of a 6 or so, and only get a bonus
of 10 percent on your comprehensive auto insurance and you wind up paying $2,000 a year for your auto insurance, then your bonus is only $200.

However, if you pay $300 for your bonus claim protection, then that is probably not a good deal.

At the same time, if you have a high rating, perhaps a 1 or 2, and are getting anywhere from a 40 to a 60 percent discount on your insurance, then it most likely makes sense to keep that bonus coming by paying extra to be able to make a claim.

#5. Generally, you can make a claim and keep your bonus intact if you are not at

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Of course, different auto insurance companies have different rules, but it makes no sense to remove or downgrade your no-claim bonus if you are sideswiped by another driver who ran through a red light.

When discussing your insurance with your company, make sure that you will not have your no-claim bonus removed in the case of an accident that is not your fault.

#6. Check about transferability.

Let’s say Koal gives you a good discount of say 40 percent, but you inquire about car insurance with Vegemite.

Most legitimate companies will offer you the same no-claim discount as you obtained from your old company, based on your rating.

But a few companies will not let your rating be completely transferable.

If you have a great driving record, this is certainly something to inquire about before switching companies.

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