Money
13 genius ways to save big money on your car insurance premiums
You’re not imagining it – car insurance premiums have gone through the roof lately. It’s time to take a look at exactly what you’re paying for to see if you can make some savings.
By Bron Maxabella
I recently renewed the car insurance policies on 3 cars and was shocked how much insurance seems to have gone up since last year. Then I remembered that I was shocked last year as well…
We are all paying far more than ever before and insurers say there are a number of reasons for that. For instance, the increased cost of parts and labour coupled with worldwide supply shortages means there’s been a significant increase in the average cost of claims.
Australia has also been experiencing a record number of severe weather events such as hailstorms, bushfires and flooding which have also added to insurance repair costs – and therefore the cost of premiums.
This all seems fair, but the facts don’t make car insurance more affordable when renewal time rolls around. Here are 13 things that just might.
1. Increase your excess
One low-effort (but potentially risky) way to reduce your insurance premiums is to increase your excess. This is the amount you pay out of pocket in the event of a claim – your insurer covers the rest. The higher your excess amount, the lower risk your insurer has to take on, which typically reduces your premiums.
To give you an idea of how much your premiums could be reduced, I got a quote from 3 large insurers to compare how much the premiums for comprehensive insurance would be for a random luxury family SUV car if I took on a higher excess. I based this using the lowest and highest excesses offered in an online quote – this varied insurer to insurer, ranging from $450-600 lower excess to $1750-2,000 higher excess. Here are the resulting savings:
Of course, if you’re going to increase your excess to reduce your insurance premiums, you need to be absolutely certain that you can pay the higher excess if you had to make a claim. You should also bear in mind if you have a minor accident and the cost of repairs are less than your excess, you won’t make an insurance claim and instead will get the repairs done yourself.
2. Shop around
If the above table doesn’t remind you to shop around to find the best insurance policy for you, nothing will. There’s a variance of almost $795 between the lowest and highest premiums on the lower excess and almost as much on the highest.
Remember, within the parameters offered to me by each insurance company’s online quote system, I entered the same criteria to get all of these quotes. Same car, same address, same mileage, same everything. A quick comparison of your own insurance needs will likely turn up similar savings.
The fastest way to compare insurance premiums is to use a free comparison website like iSelect. Comparison websites make a complex job quick and easy, but do keep in mind that they may not offer every insurance company as an option.
CHOICE also has an independent comparison tool, but you’ll need to be a member to access it. The savings you make using these kinds of tools will more than likely cover the cost of joining.
3. Have more than one insurance policy with one provider
Another super easy way to save money on your premiums is to have all of your insurance needs with one insurer – it’s called a ‘multi-policy’. Most offer at least 10% discount if you have a multi-policy with them. That 10% can add up to substantial savings when you consider the overall cost of your car (possibly more than one car), home and contents and other insurance policies.
That said, always take the time to check what you’re buying. Having multiple policies with one insurer does not necessarily mean that insurance will be cheaper – if the multi-policy discount is 10%, you’ll need all your premiums to be priced at least 10% over and above in order to see any savings.
So remember to do the ‘shop around’ thing first. You may find that each insurer offers a better deal on one type of insurance, not all. So even with the 10% discount, you might still save money overall if you go with the best deal offered for each of your insurance needs.
4. Pay annually
Regardless of how many insurance providers you have, you’ll usually save a stack of money if you pay your premium upfront – or annually rather than monthly.
For example, taking out a policy with insurer 1 above, at market value with the higher excess, the offer was to pay $1,773.73 annually or $174.20 a month. Meaning that by paying monthly I would ultimately pay $2,090.40 for the exact same policy – paying the ‘annual’ premium upfront saved me $316.67.
5. Pay online
Most insurers will give you a discount for buying your insurance policy online. A quick check of current offers showed that most providers give a 10-15% discount on your first year’s premium, but discounts as high as 30% were being advertised.
If you’re nervous about doing the work yourself online, hop onto any insurance website, click ‘get a quote’ and have a play around. You are under no obligation to leave any personal details (if they ask, there will always be an option to skip and stay anonymous), so take as long as you like and see if you feel comfortable once you’ve experienced how it works.
Once you’ve mastered one online insurance quote you’ll find the process is almost identical at every other insurer.
6. Limit number of listed drivers
A "listed driver" is someone named on the policy as an additional authorised driver. This designation is crucial because car insurance companies often factor in the driving history, age and experience of all listed drivers when calculating premiums.
If you’ve got a good driving record, think twice about allowing someone without one to regularly drive your car. If they simply never drive it, you won’t have to list them on your policy, which could potentially drive up the cost of your premiums.
That said, if an unlisted driver (someone not specifically named on the policy) uses the car and gets into an accident, the claim might be denied or come with a higher excess fee, depending on the policy.
Listing all regular drivers, including younger or occasional drivers, ensures full coverage and can help avoid penalties or reduced coverage in the event of a claim. With this in mind, it’s in your best interest to add anyone who regularly drives your car. If they are a member of your household, it may in fact be mandatory that you do.
The only way around this one is to limit the number of people who drive your car at all.
7. Check the age of your youngest listed driver
It’s no surprise that an insurer considers loaning the car to the kids as much of a risk as you probably do. Younger, inexperienced drivers have more accidents than the rest of us. We don’t like to think about that fact, but it’s true.
As a result, the minute you list your kids on your insurance policy is the minute your premium goes up. In my case, by adding my 20-year-old son to my insurance policy, my annual premium was increased from $1,773.73 to $3,876.85 – more than double. This hefty increase generally applies to most policies where a listed driver is under 25. That’s because inexperienced drivers in this age group are considered a high risk to insurers.
The premium is also likely to be higher for your under-25 son than your under-25 daughter (for reasons any parent who has taught both genders to drive will immediately understand).
Further, even though I listed my under-25 year old son as a driver in this scenario, were he to have an accident I would still need to pay an ‘age excess’ on top of the policy excess – in this case $400 more.
No one ever had kids to save money, right?
The fact is, there’s no real way around this one, but if your kids don’t live with you and only drive yours occasionally, there might be a small hack.
If they’re not a regular driver of your car, you may not have to list them on your insurance policy. Before you do this, be sure to read all of the fine print of your policy’s product disclosure statement (but you’d do this anyway, right?). Many insurance providers require you to list anyone in your household who drives the car, even if it’s only every now and then – if they’re not listed and get into an accident, you won’t be covered.
Even if your under-25 driver isn’t a household member and isn’t required to be listed, you’ll still have to pay an additional age excess if they get into an accident – in the case of the policy I was quoted for, the age excess is $1,400 for an unlisted under-25 driver, which is $1,000 more than it would have been if I had listed them.
If you’re prepared to take that risk and can afford to pay the hefty age excess if you make a claim, this hack could save you a significant amount of money on your annual premium.
It’s probably a good idea to use those savings to treat the under-25s to defensive driver training…
8. Insure for market value
Another potentially big saving on your insurance premiums is to insure for ‘market value’, not an ‘agreed value’ (or an exact value you specify at the time of taking out the policy). Being covered for the market value means your insurer will determine a reasonable replacement cost based on what your car's worth 'in the market' at the time of your claim. It will generally result in a reduced premium.
For example, in one of the quotes I received above, changing my car value from a specific amount covered to ‘market value’ resulted in an instant $500 decrease in the annual premium.
Note that in order to take advantage of this one you’ll need to play around with the ‘amount covered’. If you choose the lower end of the amount suggested, you may in fact see a reduction in your premium than if you chose the market value. Which is fine, but it may mean that if your car is a ‘write off’, you won’t receive enough from your insurance policy to replace the car with a similar make and model if you need to.
9. Use the car less
Usually, the less you drive the insured car, the lower the premium. Which makes sense because the less you drive, the less risk you have of getting into an accident. So, select the lowest possible kilometres you would drive on average each year and stay under it.
To give you an idea of how much you can save here, dropping down one bracket – from driving up to 20,000km per year down to 15,000km per year – instantly saved me around $100 on the annual premium.
Keep in mind that if you’ve exceeded your estimated kilometres when you make a claim you will have to pay an ‘odometer excess’, so do your estimates carefully. But if you find you’re likely only just tipping into the next bracket up (eg. you estimate you’d use your car 15,500 kilometres a year), resolve to make some small changes to keep your kilometres down and select the lower odometer estimate to get your savings.
10. Secure your car
Anything that reduces the risk of your car being stolen or damaged will likely reduce your premiums. Cars with an alarm and engine immobiliser to deter thieves will reduce the cost to insure them.
Even if your car doesn’t have these security features built-in, parking off the street will save you money, parking under cover will save you more and parking in a locked garage will save you the most.
Of course, you might not have a garage to park in, so feel free to skip this one. But if you do have a garage but don’t use it because it’s jam-packed with… stuff, it’s definitely worth clearing out the garage to fit the car in. Sell all the stored things you rarely use and you’ll even make some extra money.
11. Downsize your car
Another way to fit the car into the garage might be to get a smaller car. This should save you big on your insurance premiums too. That’s because smaller cars are usually cheaper to repair (even if they’re a luxury badge).
Another way to downsize is to take on a less fancy car. EVs may be great for the environment and your overall running costs, but they carry a hefty insurance slug (up to 70 per cent more for insurance than petrol or diesel cars, and hybrid cars aren’t far behind).
Some brands attract substantially higher insurance premiums as well – European brands are at the top of this list. That’s because they are usually more expensive to repair than brands from other countries like China, Japan or Korea.
If you’re in the market for a new or new used car, do your research and factor in your insurance costs to find the best car for you.
12. Transfer your No Claim Bonus
A No Claim Bonus rating (sometimes called a no-claim discount) is a discount you receive from your insurer for not making any claims against your policy. It’s basically a reward for proving that you’re not a risky driver.
The more consecutive years you remain claim free, the higher your rating and the bigger your discount. Most insurers will cap your rating after a certain number of no-claim years (usually 5 years).
Your existing insurer will have a record of your No Claim Bonus, but it shouldn’t tie you to a particular insurer – not if there are savings to be made elsewhere. If you decide to take your insurance elsewhere, almost all insurers will let you bring your No Claim Bonus with you, as long as it’s current and you’re insuring the same car. You’ll need to supply proof of your current No Claim Bonus in order to stay on the same rating with your new insurer.
This is a pretty simple process with most insurers – providing a renewal notice or offer from your previous insurer that shows your no-claim discount (or no-claim bonus or driver rating) is usually all you need to do. If you haven’t got a renewal notice or offer from your previous insurer, simply request one.
13. Consider the insurance you need
Depending on the value of your car, you might find you only need third-property car insurance, not comprehensive. This works if you drive an older car, but you still want to make sure you’re insured if you accidentally run into the back of a, say, a new Porsche Cayenne (market value estimated at between $138,700 to $364,700, depending on model).
Using our earlier example as a comparison, the same car insured only for third-party damage would cost $482.92 per year. That’s a saving of $1,250.81 on the higher excess premium cost of $1,733.73. I can get third-party plus theft and fire cover for $501.04.
There are many factors to weigh up before you ditch comprehensive cover, but it’s definitely worth doing the heavy lifting to see if it’s right for you.
Feature image: iStock/mapodile
This article contains general information only. It is not financial advice and is not intended to influence your decisions about any financial products. Your personal circumstances have not been taken into account and you should always seek your own professional financial and taxation advice that takes into account your financial circumstances, objectives and needs.
You might also like: