The cost of car insurance varies because there are many different factors at play in computing your premium.
These factors include the type of policy you choose, your profile as a driver, the car that you are driving, and your location.
Here’s a quick guide on the factors affecting the price of your car insurance:
The Car Insurance You Choose
On top of the Compulsory Third Party (CTP) car insurance that is mandatory in Australia, there are other car insurance policies that you can choose:
- Third party property damage
- Third party fire
The level of car insurance you choose will affect the cost of premium because comprehensive insurance will add another layer of protection against more risks so the price is higher than buying a third party insurance.
Value coverage is another factor. This refers to the policy cover if it is agreed value or market value. The latter is more affordable but has some disadvantages.
Meanwhile, some insurers permit adjustments on the excess payable upon claiming so the insurance premium varies. The higher the excess, the lower you need to pay for cover, and the other way around.
Finally, when you need to get car insurance, you will be presented with different options that could add extra cost to your policy. For example, adding windscreen cover and roadside assistance can increase your insurance cost.
Your Driving Record
Car insurance companies also consider different factors about your driving profile.
One factor that is often considered is your age. Because of the fact that younger drivers are more likely to be engaged in car accidents, the insurance policy for people under 25s is considerably higher compared to older drivers.
Meanwhile, a male driver is seen as riskier than a female driver, and so they are more likely to file a claim. But if you are older and married, the price of car insurance is lower.
Insurance underwriters also consider your driving experience in assessing your risk profile. Thus, policies for L-platers and P-platers are higher.
You are more likely to get a higher insurance premium if you have been involved in a road accident or you have a record of filing an insurance claim.
Expect a more expensive premium if you have acquired a handful of traffic violations and speeding tickets.
Some types of cars will carry higher insurance premiums because of several factors.
Of course, a 7-year-old hatchback that is worth $9,500 will cost lower premium than a $70,000 luxury car.
Insurers will also consider the cost of car repair. If your car brand has available service dealerships across the country, then the insurance is a lot lower. Sourcing out spare parts will be easier and the repair cost will be cheaper.
If you own a vintage car, then you may need a special car insurance cover so your special collector item will be covered.
Higher premiums are also added for cars with more horsepower and more cylinders. Insurers think that people who are driving high performance cars are more likely to engage in risky behaviour on the road.
Your insurance premium can be lower if your car has an upgraded anti-theft system. Cars that are assessed with higher safety ratings also carry lower premiums.
Insurance companies will look into the car theft situation in your area to figure out the probability of you filing a claim.
The number of drivers are also considered because the more cars on the road, the higher risk for accidents to happen.
Expect to pay for higher premiums if your suburb is prone to flooding or storms, which are considered high risks.
Your insurance cover will also be lower if you have your own locked garage. A car that is left parked on the street is more likely to be damaged or stolen so the cover is higher.
How to Reduce the Cost of Your Car Insurance
Here are proven tips to help you save money on the cost of your auto insurance from buying a new vehicle to renewing your policy.
Buy a cheap or popular car
Popular cars that are also cheap carry lower insurance premiums. Rare cars, especially those that are not available in Australia will cost you higher insurance cover.
Stay away from modifications
And as much as possible, try to avoid modifications. Insurance companies will calculate the cost of extra features and will add into the cost of insurance. Check ahead how modifying your car will affect your insurance before you visit an auto shop.
Add aftermarket security systems
Installing important aftermarket security features will not only improve your car’s security but will also help in reducing the cost of insurance premium. For example, VIN etching is affordable but can make a huge difference in the rates you need to pay. Just take note that not all insurance providers will consider these features in assessing risk, so you need to check ahead.
Choose the right coverage
Know what level of cover you need. If you have a simple car that you are only using to go to work, then perhaps you only have to buy a basic insurance policy such as a third party property car insurance. Also try to find insurance based on your use. For instance, if you are only driving during weekends, you can probably try pay-as-you-drive (PAYD) insurance or distance based vehicle insurance.
Go for higher excess
By choosing a higher excess in your insurance coverage, your insurer can provide you lower premiums. But be sure that the excess is still reasonable when you have to file a claim.
Get rid of riders that you don’t need
Take some time to think about whether or not you need all riders and extra options that come with your car insurance. Many of these options can bump up the cost of insurance, so you should assess your need.
Limit car drivers
Including a young driver to your declared drivers will significantly increase your insurance premium cost. Many insurance providers will lower down your premium if you can ensure that no driver under 25 will use your car.
Compare Car Insurance – It Will Only Take 15 Minutes!
Car insurance premiums are set to rise about 4% in the coming months, as insurers attempt to squeeze out more profit.
The forecast comes from the latest report released by JP Morgan and the consulting firm Taylor Fry.
Seen one, seen ’em all
But the truth is, there really isn’t much to differentiate car insurance – most policies offer similar, if not identical, features.
And thanks to consolidation, many companies are the same – just operating under other brands.
Nearly all comprehensive car insurance policies offer cover damage accident, theft, fire, storm, flood, hail and vandalism, and provide at least $20 million of public liability.
Most car insurance policies also offer a 24-hour helpline, lifetime repair guarantee (if you use an authorised repairer) and an agreed-value policy, meaning you decide how much to insure it for (with the exception of Bingle, which offers market-value only).
That makes price the main consideration in most cases.
There is no benefit in being loyal – even though I can’t help myself
Most insurers know us too well. They know we’re too lazy to shop around
So they offer newcomers discounts and nothing to staying put. So it’s important not to pay the lazy tax by just mindlessly renewing an existing policy.
I just spent just 15 minutes getting quotes online from 4 different companies. All of them had very simple quoting systems and the process was really easy to do.
I was actually staggered at the differences in the quotes I received and how each of these different companies have priced me and my car’s perceived risk. Each person and car would be assessed differently, so these results are not meant to make you assume that one company will always more expensive than another, because they’re not. Here are the results I received when all of the parameters/variables were the same:
- AAMI : $818.35
- Allianz : $811.28
- Budget Direct : $669
- QBE : $1,140
So for 15 minutes work, I could have saved $149.35. If I was working, that would be an hourly rate of $596 or a daily rate of $4,172.
Paradoxically, I’m sticking with AAMI, because they paid a massive claim for a really dumb at-fault accident I had a couple of years ago. And they were really nice about it. I can’t help but be loyal, despite the price differences.
But at least I made a conscious decision.
Compare your current policy and get a quick online quote by trying different companies. I’ve included links below. If you experienced significant differences, like I did, please share your experience by commenting on this article.