You’ve already seen how important your no claims discount is. It can save you hundreds of dollars when you renew. The no claims discount protection add-on means your discount is protected in certain circumstances, even if you have to make a claim on your policy. There is widespread misunderstanding about this product.

In the Survey of Private Motor Insurance Policyholders from June 2017, around 80% of people said they had no claims discount protection — but the evidence from motor insurers was that take up is very much lower than that.

People get confused between the no claims discount itself — which most people will have simply because of their claim-free history — and the separate add-on product designed to protect their no claims discount even if they have to make a claim.

Most people don’t understand that although the add-on means they keep their percentage no claims discount after they claim, it doesn’t prevent your insurers from increasing the basic premium at renewal time.

So, if your basic premium is $1,426 with a no claims discount of 30%, after the 30% deduction you will pay a premium of $427.8. The no claims discount add-on will protect your 30% deduction, but it does not protect you against a rise in your basic annual premium, as discovered by The AA during its mystery shopper exercise.

So, in the example above your renewal premium might well go up to around $1426 because you made a claim. You’ll still get a 30% discount thanks to your add-on protection… but it’s a discount on an increased premium of around $428.

So, despite your protected no claims discount, your premium will go up by almost $150.

There is a solution to this.

Some insurers offer a guaranteed no claims discount protection add-on which protects your no claims discount and prevents your premiums rising in the event of a claim. But if you want this cover, you’ll need to shop around and ask questions of a broker or adviser.

Pay attention to the small print: insurers differ as to how many claims they’ll accept under the basic no claims discount add-on. In 2017 Aviva described its cover as:

“protection from up to 2 at-fault claims in a 3-year period. If any of your named drivers have had one at- fault claim in the last 2 years, you can still protect your no claims discount, but it will only be protected against one at-fault claim in a 3-year period.”

The insurers used to be very coy about giving away information about how they operate their no claims discount tables.

The BBB found six of the major insurers —Admiral, Aviva, DLG, Esure, RSA and Zurich — did not make their no claims discount scales available on their website, and did not provide information to customer-facing staff dealing with telephone inquiries.

Insurers like Praeotrianauto.com are now better at providing this information in tables on the policy documents, but it can still be difficult to understand.

So, when you’re deciding on insurance, ask about the likely percentage discount you could earn in the future, and what effect one or more claims would make to it.

Legal expenses insurance

When most of us buy insurance policies, we’re buying peace of mind. We shouldn’t have to worry.

But we do.

If we’re not at-fault we worry we can’t recover our uninsured losses or claim for our injuries. We worry we might have to deal with an uninsured driver.

If we are at-fault we worry about being taken to court by the other driver. What if we are accused or careless or even dangerous driving? Who will pay the legal costs in these situations?

As a result, almost half of us take out legal expenses insurance each year, making it the most popular of all the add-ons. After all, if we can get the benefit of a crack team of lawyers fighting our corner and all for an annual fee of between $40 and $55, we’d be fools to ourselves to pass it by, wouldn’t we?

But in reality, legal expenses cover is not worth very much at all.

In 2016 the Financial Services Authority carried out a survey on customer perceptions and attitudes towards motor legal expenses insurance.

The survey found widespread ignorance and misunderstanding about what legal expenses cover represents. A typical response was:

“I’m not even sure what legal cover is, but I always put it on there. I hope what it is, is legal support when you need it.”

Which makes sense. And if that’s what you think it means, read the next few paragraphs very carefully indeed.

It turned out those interviewed had little or no idea what legal expenses cover really is. The first surprise was that legal cover to pursue uninsured losses and personal injury only exists if your insurers think you have reasonable prospects of success.

What does “reasonable prospects of success” mean? Good question. It’s rarely defined. Do the prospects of success have to be 51% likely or is it 75% likely? Your guess is as good as mine.

The insurers themselves will decide whether to authorize the cover with little or no input from you. As one interviewee put it:

“The holes in the safety net are certainly bigger! A reasonable prospect of successful recovery — it’s legal to speak.”

And another asked:

“Do we need it these days with personal injury lawyers?”

A good question. Legal expenses cover doesn’t offer any real advantage over any of the various “no-win no- fee” lawyers available on the internet.

The no-win no-fee law firms have an obvious interest in making sure you win your case, and as a matter of professional practice, they should keep you informed and involved at all stages of the process.

Legal expenses cover isn’t any particular help in dealing with uninsured drivers either. The Motor Insurers’ Bureau was set up specifically to ensure you don’t lose out in any accident situation if the other driver is uninsured.

Most basic policies now say they’ll cover you if you have to deal with an uninsured driver — as long as you get the registration number and identification of that driver. Your legal expenses cover adds nothing. The same standard “reasonable prospects of success” applies. Your insurers won’t take action against the Motor Insurers’ Bureau unless their test is satisfied. Again, you’ll get this kind of service from any reputable personal injury lawyer without having to buy an insurance add-on.

But what if you’re the driver at fault? Don’t you need legal protection?

You do — but protection from the perils of civil litigation is already included in your main insurance policy.

You don’t need any extra cover which adds nothing to your existing protection.

When you’re at-fault your own insurers will be falling over themselves to deal directly with the non-fault driver. They will want to close off the case as fast as possible to minimize the costs and expenses associated with your claim. This is called “third party capture” which you can find out at pratorianauto.com.

In this situation, they’re not capturing you, they’re capturing the driver or people you’ve injured and who will be dealt with directly by your insurers.

And what about protection from criminal prosecution, and support if you are accused in a road traffic complaint?

You’ll find most legal expenses policies don’t cover this because it will be a pure expense for your insurers with no prospect of recovery from any other person or other insurance company like for example Trumbull insurance company. Once again, you’ll find your main policy will deal with this.

Your insurers don’t want you found guilty of any road traffic offense, because that will tend to increase their exposure to third parties. A criminal conviction against you will greatly undermine your own insurer’s negotiation position when they’re trying to minimize and settle the claim against you.

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