4 common traps to avoid when lowering car insurance premiums 

‍It can be tempting to cut corners when it comes to reducing your premiums, but making these mistakes can mean you may pay more in the long run.

By Maddie Southall 

During these expensive times, it can be very tempting to cut corners when it comes to lowering your car insurance premiums, but this can be a risky business.

Don’t get us wrong, re-evaluating your insurance costs by doing a price comparison every year can be a great way to ensure you are getting a competitive rate. However, if you’re tempted to cut corners a little when applying for insurance, there are some pitfalls you need to consider.

Here are 5 critical traps to avoid when attempting to lower your car insurance premiums:

1. Misrepresenting your details

Misrepresenting details, or not providing honest or accurate information to the best of your knowledge, such as where your car is parked, security devices installed, or your driving history may seem harmless, but it can have serious consequences for your wallet in the long run.

“[People] must provide accurate, honest, and complete information when applying for or renewing an insurance policy… [that way] the insurer can properly assess risk and offer appropriate coverage,” says a spokesperson from Allianz Australia. 

If your insurer discovers any misrepresentation, your policy may be cancelled, your claim could be rejected, or you might not receive the full payout – which completely defeats the purpose of having insurance in the first place.

To be clear, a ‘misrepresentation’ includes a statement that is false, partially false or which does not fairly reflect the truth.

Don’t risk it: always take reasonable care to provide accurate and truthful information when applying for, renewing or updating your car insurance.

Also, to keep your coverage in place, let your insurer know straightaway of any changes they should reasonably know about, including any unrepaired vehicle damage.

While being, ahem, “less than truthful” about your details may cut premiums in the short term, it’s just not worth it in the long run. There are many other easy ways to save on your car that are far less risky.

2. Setting your excess too high

In short, your insurance excess is the amount you will likely pay out of pocket when you make a claim (unless an excess is waived by the insurer or under policy terms and conditions).

For example, if you have an excess of $1000, you may need to pay the first $1000 before your insurance policy covers the rest of the damage (if this applies).

Raising your car insurance excess can lower your ongoing premiums, but it might cause you more stress in the long run if you're not prepared for the financial exposure.

This can work if you don't expect to make many claims, and you are prepared to pay the excess higher cost and you’re confident that you will have enough savings to easily cover the excess.

It's therefore essential to consider your financial situation before opting for a higher excess, as the savings on premiums may not be worth having to pay your excess during the insured period.

3. Not listing a young driver who drives your car

If a young driver under the age of 25 is regularly using your car, you could receive a lower age excess at the time of a claim by listing them on your policy.

If you don’t list them you might pay a lower insurance premium but be expected to pay a higher age excess at the time of a claim.

Definitely something to consider before your kids come asking for the keys…

Will adding drivers over 25 to your car insurance make your premiums go up? Maybe – it depends on your insurance provider and the driver’s information and history.

4.   Understating your annual mileage

The formula is simple: the more you drive, the more likely you are to be involved in an accident. That’s why insurers ask you to estimate your annual mileage to get a better picture of your potential risk.

One of the major risks of misrepresenting your annual mileage is that your insurer may cancel your policy and/or reduce their liability in the event of a claim, leaving you without full coverage.

In some cases, this could mean you won’t receive a payout at all, while in other situations, it could result in a smaller payout than expected. 

Yikes, this is not a situation you want to find yourself in. So, it’s important to estimate your kilometres based on how much you expect the vehicle to be used.

A great way to work out your mileage is to calculate how far your car is driven in a week then multiply that by 52. And don’t forget to add extra kilometres for any planned long trips or holidays.

How to reduce costs?

Now that we’ve highlighted common traps to avoid, let’s look at some reliable ways to potentially save money on your insurance premiums instead.

Allianz Australia shares some great ways to help reduce premium costs:

• Review cover regularly: Check your policy options and only pay for the coverage you actually need.
• Name drivers: Depending on your policy, limiting coverage to named drivers only could reduce your premium in exchange for a higher excess – check with your insurer.
• Adjusting the basic excess: Reviewing and increasing your excess over time and depending on your circumstances, could lower premiums, however you’ll need to ensure the selected excess is affordable if you need to make a claim. 

• Instalment payments: Depending on your insurance provider, spreading your premium payments over 12 monthly payments could lower your upfront cost. Allianz doesn’t charge extra if you pay monthly rather than annually, but do check as many insurers will charge you extra if you don’t pay upfront. 

More ways to save money on your car:

• 13 genius ways to save big money on your car insurance premiums‍
• 5 ways to save money on your car (that don’t involve catching the bus)‍
• How to make extra cash from your car (no Uber driving necessary!)

^{Feature image: iStock/ Creative Credit}

This article reflects the views and experience of the author and not necessarily the views of Citro. It contains general information only and is not intended to influence readers’ decisions about any financial products or investments.  Readers’ personal circumstances have not been taken into account and they should always seek their own professional financial and taxation advice that takes into account their personal circumstances before making any financial decisions.