Is it worth protecting your no claims discount by paying more?

Many people are surprised to learn that no claims discounts are available on most private medical insurance policies. We accept it as standard on our car and home insurance, but when it comes to out health insurance it’s a contentious subject.

Critics argue the system of no claims discount rewards the healthy and penalises the unwell. While in a car crash insurers can attribute blame on the party that caused the accident, when it comes to out bodies why should we be blamed for becoming ill? Activists argue no claims discount schemes prevent policyholders from seeking the medical help they are entitled to under their insurance policy, with many being reluctant to claim due to the prospect of increased premiums the following year.

Like it or not, for now the no claims discount on your healthcare policy is here to stay. Some insurers offer the option to take out additional protection on your no claims discount, so is it worth paying more to take this out?

What is no claims discount?

Firstly it’s important to understand what a no claims discount actually is. They only apply to individual medical insurance policies, so won’t affect you if you’re part of a company scheme, and generally include the following components.

  • A scale of no claims levels, ranging from say 0 to 10 or 1 to 20 depending on your insurer.

  • Each no claims level has a corresponding discount associated with it. So someone just taking a policy out will have a level of 0 and receive no discount, compared to someone who hasn’t claimed in 20 years and has the maximum level of discount, usually around 75%.

  • If you make a claim over the course of the policy year you drop a specified number of no claims discount levels.

  • If you don’t make a claim over the course of the policy year you gain a point on the no claims discount scale, and qualify for an increased premium reduction next year.

  • With most insurers it doesn’t matter how many claims you make in a policy year, you will only lose your no claims discount once.

  • If the value of your claim is lower than your excess, so your insurer doesn’t pay out any money, your no claims discount won’t be affected.

How does a protected no claims discount work?

  • If you make a claim over the course of your policy year you won’t lose any of your existing no claims discount for the next policy year. You won’t increase your level but it will remain the same

  • If you don’t make a claim this policy year you’ll increase your level of discount as usual.

What are the advantages of protecting your no claims discount?

  • No financial pressure not to claim – You’ve taken out your medical insurance for a reason, so that when you need medical treatment you can go privately. The last thing you want is to be deterred from making a claim due to the thought of financial implications.

  • Peace of mind – You can be safe in the knowledge you’ll still have your discount next year and so you’ll be able to afford your insurance. For some policyholders the loss of their no claims discount could make their insurance prohibitively expensive.

  • Good value – Protecting your no claims discount is generally relatively inexpensive.

What are the disadvantages of protecting your no claims discount?

  • It won’t freeze your premiums – Many people have the false belief that if they take out a protected no claims discount their premiums will stay the same next year. Unfortunately as we age our risk increases and so do our premiums. Also medical fees and drugs get more expensive every year, so your insurer has to raise premiums to accommodate this.

  • Yet another additional expense – When times are tight the last thing policyholders need is a additional option which pushes up their premiums.

  • Claiming may not impact your discount as much as you think – You may only drop a few discount levels if you make a claim, while this could reduce your discount by 5-10% this is often not as drastic as many policyholders think.

As the no claims discount system varies depending on your insurer, its best giving them a call to see exactly how the no claims discount structure works for them. When you go to make a claim you can enquire as to how this will impact upon your no claims discount, which will give you the information you need to calculate whether making a claim is financially worthwhile. If you can afford it then protecting your no claims discount is a great way to take another worry off your mind.

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