How is a no-claims bonus usually structured?

A no-claims bonus is typically structured to reward policyholders for not making any claims during a specified period, usually on an annual basis. This means that for every year a vehicle remains insured without any claims, the insured earns a bonus or discount on their premium for the following year. This system incentivizes safe driving habits and responsible vehicle ownership, encouraging customers to avoid incidents that could lead to claims.

The other options have limitations that do not align with standard practices in no-claims bonus structures. For example, stating that it applies only to the first vehicle in a fleet overlooks the nature of no-claims bonuses, which can apply to multiple vehicles in personal ownership or to entire fleets under a corporate policy. Indicating that it resets after every policy duration would negate the very purpose of the bonus, as it is meant to accumulate over time, thereby rewarding the policyholder for their claims-free years. Lastly, suggesting that it is applicable only for personal vehicles limits the application of no-claims bonuses, as many commercial insurance policies also include similar benefits based on claims history.