Car Insurance Savings Guide

It's possible to save hundreds of dollars on Car Insurance by using these tips to find the best value cover for you.

Guide Contents

    Car Insurance: The Basics

    In most states, some form of car insurance is a necessity and it costs very little for the peace of mind it creates. Depending on your level of cover, your car insurance will protect you (financially) in the event of an accident, damage, theft, fire or even vandalism.

    The level of car insurance you require depends on your personal circumstances and your tolerance for risk. Here’s a summary of what the different policy types cover.

    Comprehensive car insurance

    A superior level of insurance that covers not only your own vehicle but that of the other person with whom you’ve had an accident. Comprehensive insurance lets you insure your car at an agreed value or its current market value with the features and benefits you desire.

    Good for: drivers who own valuable cars or who simply want complete peace of mind.

    Top tip

    Always compare quotes before taking out a comprehensive policy; costs will vary greatly amongst the different insurance companies and the difference between covers may not be significant for you. 

    A few minutes comparing quotes could save you hundreds. See the 9Saver Guide below on “How to save on your Car Insurance at renewal time“.

    Third party property

    A basic policy that covers damage you cause to other people and their property, should you ever have an accident. This will protect you by covering the cost of repairs to the other person’s car. According to ASIC Moneysmart, some third party property policies include an ‘uninsured motorist extension’ that covers you if your car is damaged in accident and you’re not at fault. Check the PDS.

    Good for: People with ‘runabout’ cars that are worth very little. If your car is worth less than the cost of a comprehensive car insurance policy, this cover will protect you against third party claims but not damage to your own car.

    Third party property (fire and theft)

    This is Third party property insurance, but with the added benefit of covering your own car for fire or theft.

    Good for: drivers whose car is worth very little, but who want cover for the basics (on top of the base third party insurance) should your car be stolen or suffer fire damage.

    Once you’ve selected the type of car insurance you require, you can begin looking for ways to save money and reduce your costs. Like reducing any bill, you need to be informed and prepared to shop around to make insurers compete for your business.

    Our 5-Step Guide to saving on your Car Insurance at renewal time

    The price of car insurance can vary by hundreds of dollars; if you spend a bit of time comparing at renewal time, you can find the best possible deal and avoid paying ‘the lazy tax’.

    Unfortunately, unlike other insurances and utilities, the major car insurance companies do not currently cooperate with comparison sites, which means you’ll need to do a bit more legwork than for other products

    Top tip

     List the features you need and the quote from each provider. You could do this in a spreadsheet to easily compare without getting overwhelmed.

    But shopping around is not going to save you a mere $50 – it can sometimes result in a saving of over $500. So it’s worth it.

    Step 1: Set a benchmark by mystery-shopping your existing provider.

    Do an online quote and calculate what you would pay if you were a brand new customer. This not only sets a benchmark for your next set of comparisons, but also gives you leverage should you wish to negotiate with your existing insurance provider.

    Step 2: Compare three different providers

    Give yourself an hour to compare a range of different insurance providers. Look for a well-known price-conscious brand such as Budget Direct*, Bingle* or Real Insurance*.

    Then, find two premium insurance brands such as NRMA, Allianz, or AAMI. Submit online quotes directly on their respective websites and record your findings within your spreadsheet.

    Step 3: Wait 24 hours!

    Now that you have compared a total of four providers, you should be able to see a clear winner in terms of price. If you want to reduce your premium even further, wait 24 hours before doing anything as many insurance websites send ‘cart abandonment’ emails offering you a further discount or freebie should you come back and accept their policy quote.

    Step 4: Ring your existing insurance provider (optional)

    If you have reasons for wishing to stick with your existing insurance provider, consider giving them a call to haggle a lower price. Explain to them that you did an online quote on their website and it’s far cheaper than the renewal form you received. Tell them about any other cheaper quotes you got. Sometimes it helps to calculate the percentage increase and clearly tell them it’s not acceptable.

    Step 5: Pick a winner

    Buy the selected car insurance policy online with your credit or debit card and be sure to pay the full annual amount if you can. (Paying monthly will increase your premium by as much as 15% so always try to avoid this.)

    11 Clever Ways to Reduce your Car Insurance Premium

    1. Increase your excess

    A simply yet effective way to reduce your yearly premium is to increase your policy’s ‘excess’. Excess is the amount of money you must pay to make a claim. You can opt to increase your excess to reduce your premium, often by quite significant amounts, as long as you are comfortable to pay this amount should you have an accident or need to make an at-fault claim. Most policies have an excess of around $500 with the ability to increase up to $2,000+.

    Fact

    For a 5-year-old Toyota Corolla, increasing your excess by $500 can cut your premium by about $100

    2. Pay your premium annually, not monthly

    Most car insurers offer you the ability to pay your premium annually or monthly. Paying monthly helps those who have cash flow issues to afford the cost of insurance, however paying monthly unfortunately comes at a premium and can cost you between 10-15% more in total.

    Can’t afford to pay annually? Set yourself a goal to regularly save money to put towards the following year’s annual premium; this will help you when the time comes to part with $1,000 in one lump sum.

    Top tip

    Pay annually to save about 15% on your premium with some insurers.

    3. Insure your car for ‘agreed value’ not ‘market value’

    Your car insurer will suggest a ‘market value’ policy when signing up for a policy. You can reduce your annual premium if you insure your car for less than this, so do your research and learn exactly what your car is worth and what you would be comfortable receiving if your car was ‘written off’ in an accident.

    Some people opt to insure their car for less than market value, which lowers their insurance costs and still provides relatively high levels of cover should the worst occur – a complete write-off. (As long as you’re prepared to only receive enough money to buy a cheaper car in the case of a write-off.)

    4. Drive less, pay less

    Certain insurers (such as Real Insurance*, Youi* and Woolworths*) offer insurance policies that are specifically designed for customers who drive very little. If you tell these insurers your average car usage, they may be able to lower your premium. They will likely ask you very detailed questions about your car usage, so be prepared for a longer quoting process.

    5. Remove additional drivers (specifically younger drivers)

    The more people who drive your car, the more risk and the higher your insurance premiums. If others rarely drive your car, opt to insure yourself only and avoid situations whereby someone else has to drive your car.

    Statistically speaking, drivers under 25 years of age are far more likely to have an accident; if you agree to not let anyone under 26 drive your car, you can reduce your yearly premium substantially.

    Some providers, such as Budget Direct*, provide a lower premium if you restrict the age of the car’s youngest driver to 21, 25, 30, 40 or even 50.

    6. Complete an advanced driving course

    If you ARE under 25 years of age, insurers such as AAMI will offer you a 10% yearly discount if you complete their certified ‘advanced driving courses’. These courses will take on average 4-5 hours and will teach you a range of skills to better handle high speed and dangerous situations.

    7. Prove you’re a better driver!

    Some insurers now use GPS devices to assess your risk. QBE have recently released ‘Insurance Box’ – a car insurance policy that uses a small box plugged into your dashboard to transmit data on your speed, distance travelled and how you use your breaks. This data is then compiled, sent to QBE and used to generate an estimate on how much you should pay.

    8. Never renew without shopping around or haggling

    Car insurance companies fiercely compete for your business.

    Fact

    Most insurers offer you a first year discount to get you on board. Subsequent years (and the renewal notice you receive) are then often corrected back to the more expensive cost.

    So never just renew your existing policy without first comparing other insurance providers online. If your insurance policy has gone up significantly, call them and let them know it’s not acceptable and you wish to switch providers. This will often result in a discounted premium to retain your business.

    9. Bundle your car insurance

    If you hold life insurance, home insurance or any other policies, you can consider consolidating them into one provider and asking for a discount to do so.

    Not only will this save you money, it will save you time and effort with managing multiple different providers. Insurers such as NRMA, GIO and Allianz are more likely to offer these incentives to help ‘win’ your business.

    Stop

    Some ‘multi-policy discount’ look great, but the original price is so high that the final result is not competitive.

    10. Own your own car

    If you want to reduce your car insurance, buy your car outright.

    If you have a car loan (or lease), it will likely increase your insurance premium. Car loan providers mandate you to have comprehensive car insurance (to protect their asset, which is on loan to you) and the car insurance companies know this. As such, they charge you more (because they can).

    11. Ask for a higher excess for drivers you do not nominate

    Most insurance providers will allow you to reduce your premium by electing to pay a higher excess should an accident occur via a driver you did not nominate on your policy. The savings can be in excess of 10-15% and when used wisely, is a great last minute way to further reduce your costs.

    Irrespective of who drives your car, you will still have full comprehensive car insurance. It simply means that should an accident occur while they are driving, you will be required to pay an excess which is usually around 2-3 times greater than your standard excess.

    This is a great way to save money if you rarely allow anyone else to drive your car or feel confident that if the worst occurred, you could ask your friend or family member to pay the higher excess amount on your behalf (given they were driving at the time of the accident)

    Car insurance upsells: are they worth it?

    It’s very hard to say ‘no’ to anything that is designed to help reduce your risk and financial stress. Insurance companies rely on this way of thinking when offering ‘up-sells’ to your comprehensive insurance policy. But you need to decide if they’re worth the extra money.

    ‘Up-sells’ or ‘add-ons’ are additional items you can add to your policy; they add about $20-$50 to the policy per item, but can quickly equate to paying an extra 40% on your yearly premium.

    Here are some of the common up-sells when taking out a comprehensive insurance policy:

    Windscreen cover

    This covers the cost of repairing a cracked or broken windscreen. The out of pocket expenses for repairing this yourself range from $250-$500. Look back over the last 10 years of driving and ask yourself ‘how many times have I cracked my windscreen?’ Ask yourself how often you drive on the open road. Decide if this additional cover is necessary for you.

    Roadside assistance

    This is probably one of the more useful ‘up-sell’ items on offer, unless you already have it. While most new cars rarely break down and require roadside assistance, the concept of having ‘on-call’ help is quite satisfying. But it is wise to note that many new cars offer roadside assistance for free – if they don’t, considering haggling with the salesperson to have it included.

    Hire car cover

    This covers the costs related to hiring a car while your car is under repair or out of action. Depending on your circumstances, it’s wise to remember that most insurers offer a courtesy ‘pick-up’ and ‘drop-off’ taxi when putting your car in for repair. Consider saving the money and catching public transport for the 3-4 days your car is in the workshop.

    On the other hand, many families only have one car, and the concept of being without a car for a week can seem difficult to comprehend. Certain insurers offer this benefit for no additional cost, so compare policies closely and factor this in should one provider be ‘slightly’ more expensive.

    Personal effects cover

    This will cover your personal belongings if damaged or stolen from your car. While this can be quite an expensive up-sell, it does pay dividends if your car is broken into and precious items are stolen.

    But do compare to the cost of taking the optional personal effects cover through your current Home Insurance, which will typically cover your personal effects for loss, damage or theft anywhere in Australia (not just in your car).

    Top tip

    Opt out of personal effects cover and don’t leave valuables in your car – simply take them with you and reap the benefit of not having to pay any additional premium.

    Replacement key cover

    Lost your keys?

    This will cover the costs of replacing them. Replacement keys can cost as much as $500. But car manufacturers are beginning to move towards ‘keyless cars’ that simply use uniquely coded wireless receivers to unlock and start your car. You need to weigh up the benefits of this cover versus the chances of you actually losing your keys.

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