A no-claim bonus (also called a no-claim discount) is a premium reduction that Australian car insurers offer when you renew your policy without making a claim during the previous year. Each consecutive claim-free year typically earns you a larger discount, rewarding safe driving and reducing your annual insurance cost. The discount can reach up to 60 to 65 per cent of your base premium after several years, though the exact scale varies by insurer.

How a No-Claim Bonus Works

Your no-claim bonus builds progressively. In your first claim-free year, you might receive a 10 to 20 per cent discount at renewal. This increases with each additional year you do not make a claim, often reaching the maximum discount after five to six consecutive years. The discount applies to your base premium before any other adjustments.

According to industry data, the discount structure varies between insurers, so always check your policy’s Product Disclosure Statement (PDS) for the specific scale your insurer uses (Finder, 2024). Some insurers offer steeper discounts in the early years, while others build the benefit more gradually.

When You Lose Your No-Claim Bonus

Making an at-fault claim typically reduces or resets your no-claim bonus. Most Australian insurers will drop your discount level by one or two steps, or return it to zero, depending on the claim type and your policy terms. A not-at-fault claim (where the other driver is fully responsible and their insurer accepts liability) usually does not affect your bonus, though this depends on your insurer’s rules.

Comprehensive car insurance and third-party fire and theft policies generally include no-claim bonus structures. Compulsory Third Party (CTP) insurance, which covers injury to other people, does not offer a no-claim bonus in most Australian states and territories, as CTP is a statutory scheme with regulated pricing.

Rating Protection (Claim-Free Discount Protection)

Many insurers offer an optional add-on called rating protection or claim-free discount protection. This feature preserves your no-claim bonus level after your first at-fault claim within a set period (often one or two years). You pay a small additional premium for this protection, and it can be worthwhile if you have built up a high discount level and want to safeguard it.

Rating protection does not prevent your premium from increasing after a claim. It only protects the discount tier, so your base premium may still rise due to the claim history, even though your percentage discount remains intact. Read your PDS to understand the protection limits and exclusions.

What to Do Next

Compare your current no-claim bonus level against the cost of making a small claim. If the repair cost is only slightly above your excess and making a claim would reset a substantial discount, paying out of pocket may save you money over the following years. For larger claims, the immediate financial need usually outweighs the discount loss.

When switching insurers, ask whether they recognise your existing no-claim bonus. Most Australian insurers will honour a bonus earned with another insurer if you provide proof (such as a letter or renewal notice showing your claim-free years). This portability helps you maintain your discount when shopping around for a better rate.

Review your policy’s PDS and the Target Market Determination (TMD) for your specific no-claim bonus structure, rating protection options, and claim impact rules. If you are unsure how a potential claim would affect your premium or discount, contact your insurer before proceeding, and consider speaking with a licensed insurance adviser for personalised guidance.

General Advice Warning: This article provides general information only and does not take into account your objectives, financial situation, or needs. Before acting on this information, consider whether it is appropriate for you and read the relevant Product Disclosure Statement (PDS). Consider obtaining personal advice from a licensed insurance adviser regarding your specific circumstances. Cover terms, exclusions, no-claim bonus scales, and rating protection features vary by insurer and policy. Confirm all details in your PDS and with your insurer before making decisions.