An often-asked question is whether we’re getting value for our car insurance dollar.
Sadly, quite a lot aren’t.
Insurance premiums have risen about 25 per cent since last year, meaning the average premium is costing drivers, on average, an additional $300 a year.
Here are some tips on how to keep a lid on car insurance costs.
Shop around
When your renewal notice arrives, shop around. If you can find a lower premium, go back to your insurer and ask them to match or better the best premium. Be prepared to walk away.
Loyalty isn’t being rewarded by car insurance companies. In fact, loyal customers are being actively disadvantaged. Don’t believe us? Try calling your current insurer and asking for a quote as if you are a new customer. You may be very surprised to see how much less new customers are being asked to pay.
If the quote is less than your renewal notice, ask your insurer why. If they won’t match it, find a new insurer. And never tick the box that renews your policy automatically.
Read the fine print
No-one wants to wade through pages and pages of terms and conditions, but do look at the policy and work out what extras you’re paying for that you don’t actually need.
When is the last time you replaced your car keys (although be warned that some keys are very expensive to replace)? Do you really need to have repairs carried out using genuine replacement parts or by a ‘preferred’ repairer? Can you take the chance of paying an excess for a windscreen replacement should you ever need to replace one? And if you have more than one car, or access to another car, why would you need a replacement car while yours is in for repairs? These are all things that add to the cost and are built in to your premium.
Distances travelled
Look at the number of kilometres you travelled last year. As we age, we tend to drive less and travel shorter distances. Insurance companies will reduce your premium if you can assure them that you will travel less than a specified distance (these are known as ‘Limited Use’ policies and you can usually specify the distance travelled, from as little as 2000kms a year to 10,000kms or even more). Be aware, however, that if you exceed the limit, you may face a higher excess or premium.
Review your excess
Consider a higher excess. This is a more risky approach, but insurance is always a gamble – the insurer gambles you won’t make a claim, and you gamble that you’ll come out ahead overall (premiums versus repair costs) if you have to.
You may feel comfortable sharing some of the risk by raising your excess. Of course, if you do have to make a claim, it will hit your hip pocket harder.
Another way to reduce the premium is to raise the excess for certain parts of your cover. If your car is kept safely off the road and in a locked garage for instance, you may decide to raise the excess you would have to pay if it were stolen.
Annually or monthly?
Some insurers charge a higher rate if you elect to pay the premium monthly (and many people prefer not to face a large bill once every year). Others don’t charge any extra, so shop around if you wish to pay monthly and see if you can find a competitive quote that doesn’t incorporate a penalty.
On the other hand, you may decide that paying the entire premium up front is worth the saving. Either way, don’t just settle for what the insurance company is offering – decide what’s right for you.
Type of cover
Do away with comprehensive insurance and opt for third party, fire and theft cover. Some experts suggest that if your car is worth less than 10 times the annual premium, comprehensive insurance no longer makes sense.
But even if your car is no longer particularly valuable, you are still responsible for any damage or injury you cause. Third party, fire and theft car insurance covers you if your vehicle is stolen or damaged by fire, and if you’re at fault in an accident that damages another person’s vehicle or property. You’ll still be liable for any accidental damage to your own car, but you won’t be paying out if you happen to hit someone else’s Lamborghini.
Who’s on your policy?
Younger drivers are considered high risk by insurance companies, so they face additional excesses (for a high-performance car, it can be as much as $2000) and having under-25s on your policy will substantially increase the premium.
If your car is regularly driven by a driver under 25, listing them on the policy will result in a lower additional excess being applied than if an unlisted under-25 is driving and you have to make a claim.
If nobody under 25 drives your car, tell the insurance company because it should mean a lower premium. Exclusions can be listed on your policy that nobody under 25 (or some other agreed age) will drive your car. If you need insurance that includes an under-25 driver, maybe you could cover them to drive a cheaper car, or even insure the car they drive with third party, fire and theft insurance only.
Premium advice
If your car was under finance when you took out car insurance and you have since paid out the loan, make sure you advise the insurer.
Insure your car for a lower amount. Insurance premiums are calculated on a number of factors, one of which is the value of the car you’re insuring. Generally, the less you insure for, the lower the premium.
Another factor that affects the premium is your address (some postcodes are assessed as higher risk than others). If you’ve moved, make sure you advise your insurer.
Bundle your insurance policies. Using a single insurer for all your insurance (or a number of them) usually means you’ll receive a discount on the total premium.
Maintain a good driving record. Insurers hate bad drivers and penalise them accordingly. A good driving record and claims record will make you a more attractive proposition to insurers and reduce your premium. Always assess whether making a claim is necessary – smaller claims are better handled direct, rather than through your insurer.
Pay your premiums on time. Insurers will almost always impose a penalty for late payment of premiums. Even worse, if something happens and you didn’t pay your premium when it was due, you may not be covered at all.
Before you buy a car, find out how much it will cost to insure.
Applying for insurance
You will be asked a number of questions before an insurer decides to accept responsibility for covering you.
Making an untrue declaration is a very poor decision and may result in an insurer declining your claim.
Be honest when answering and do not try to hide any existing illness or condition that may impact your ability to drive. Your previous driving and insurance history will be easy for an insurance company to confirm, so be honest about these. If there are any issues with your car, the insurer will need to know, so when they ask about its condition, don’t try to gild the lily.
Get what you pay for
As with any purchase, you get what you pay for.
We have had many reports of readers shopping around and accepting the lowest insurance quote, only to find that things get difficult when they come to make a claim. Insurance companies are very good at taking your money, not necessarily so keen to pay it out.
Before you commit to an insurer (especially one you don’t know much about), do some online research. While it’s true that more people write reviews who have something to complain about (and therefore write a bad review), you can learn a lot from other people’s experience.
Originally published on seniordriveraus.com.au and republished with permission.
Do you shop around for car insurance? Did you find a bargain? Why not share your experience in the comments section below?
Also read: How to prevent your car looking prematurely old
All insurance is way too expensive and unaffordable for many of us.
I have third party accident cover on the car and that’s it. Nothing else.
Am tens of thousands of dollars in front, and would struggle to pay the premiums anyway.