Drive a bet­ter deal

While pre­mi­ums are im­por­tant, there are other fac­tors to con­sider when you buy a pol­icy

Money Magazine Australia - - MY MONEY - NI­COLA FIELD

Car in­surance may be a grudge pur­chase but it pays to choose wisely. One in seven mo­torists claim on their car cover each year, and it’s then that they may dis­cover a super cheap pol­icy has more holes than a dirt track. Here’s what you need to know to cut the cost of cover and avoid the hid­den traps.

What type of cover?

“There is a com­mon mis­con­cep­tion that com­pul­sory third party (CTP or green slip) in­surance – a form of per­sonal in­jury in­surance – cov­ers dam­age to cars. It doesn’t,” says Jonathan Kerr, chief mar­ket­ing of­fi­cer of Bud­get Di­rect.

In fact, CTP cover only pro­tects the driver against le­gal li­a­bil­ity for in­jury or death caused in an ac­ci­dent. If you want to in­sure your car, com­pre­hen­sive in­surance is re­garded as the gold stan­dard, pro­vid­ing cover for theft plus dam­age to your own car or some­one else’s if you have a fen­der ben­der.

If you drive a banger, cheaper third party prop­erty dam­age is a bet­ter op­tion. It cov­ers the dam­age you cause to oth­ers, though not your own car.

The rule of thumb with any type of car in­surance is to shop around – not just when you first ar­range cover but each time your pol­icy comes up for re­newal. One in three Aus­tralian driv­ers has never changed their in­surer, and loy­alty doesn’t al­ways pay. Re­search by Canstar shows av­er­age an­nual pre­mi­ums for com­pre­hen­sive cover range from $1000 in NSW to less than $700 in West­ern Aus­tralia and Tas­ma­nia. So there is plenty of scope to save.

That said, pre­mi­ums shouldn’t be the only fac­tor to con­sider. “You re­ally must con­sider your own cir­cum­stances and look at the pol­icy’s ben­e­fits and fea­tures as well as price, to make sure you’re get­ting the best value for you,” says Kerr.

He says some of the is­sues that de­serve a se­cond look in­clude whether the in­surer of­fers new-for-old re­place­ment if your car is writ­ten off, and whether a 24/7 phone and on­line claims ser­vice is avail­able.

“It’s im­por­tant to be aware of any ad­di­tional ex­cesses, for ex­am­ple those that ap­ply to driv­ers un­der a cer­tain age.” This can be es­pe­cially im­por­tant if you have a young or in­ex­pe­ri­enced driver in the fam­ily. With AAMI, for in­stance, there’s no need to up­date your pol­icy to in­clude a learner driver. But if they’re be­hind the wheel in an ac­ci­dent, an ad­di­tional $400 ex­cess will ap­ply on top of your reg­u­lar ex­cess.

Choice of car mat­ters

In­surance com­pa­nies are all about man­ag­ing risk, and the three main ar­eas where you can take steps to re­duce the cost of cover are your choice of car, where the car is kept and your driv­ing habits.

In­surance prob­a­bly isn’t your main con­cern when you’re shop­ping for a car but the make and model you se­lect will be a big de­cider of pre­mi­ums. A car is stolen every 10 min­utes in Aus­tralia – over 42,000 in the past year alone – and some ve­hi­cles are more at­trac­tive to thieves than oth­ers. The Holden Com­modore takes out two of the top five places for makes/mod­els pre­ferred by thieves (see ta­ble, page 52). Driv­ing an older car doesn’t mean it will be any less at­trac­tive to crim­i­nals. Six out 10 stolen ve­hi­cles have a value be­low $10,000.

You can check out your car’s steal ap­peal at the Car Safe web­site (carsafe.com.au). It fea­tures an on­line cal­cu­la­tor that shows your car’s “theft star rat­ing” – the more stars, the less likely the ve­hi­cle is to be pinched. As a guide, the Nis­san Navara D22 has a three-star rat­ing while the Volk­swa­gen Amarok 2H has four stars.

Check ANCAP rat­ing

A good chunk of your pre­mium can be de­ter­mined by your car’s ANCAP rat­ing. The ANCAP sys­tem scores cars from one to five in terms of safety, with a five-star rat­ing the best. “A car’s safety rat­ing is im­por­tant in terms of re­duc­ing the risk of in­jury or death. How­ever, in some cir­cum­stances ex­tra safety fea­tures may make the car more ex­pen­sive to re­pair and, there­fore to in­sure,” says Kerr.

“Semi-au­ton­o­mous ve­hi­cles, for ex­am­ple, have an ar­ray of costly sen­sors that can be eas­ily dam­aged in a crash and add a lot to the po­ten­tial cost of re­pair but equally may mean the car is less likely to be in­volved in a crash.”

On the flip­side, cars with low safety rat­ings can be dif­fi­cult to in­sure at all. At least one in­surance com­pany, West­ern Aus­tralia-based RAC, won’t in­sure ve­hi­cles with less than a four-star ANCAP rat­ing. And don’t as­sume that ap­plies only to rust buck­ets. The Ford

Mus­tang FM first in­tro­duced in Aus­tralia in 2015 was awarded a two-star ANCAP safety rat­ing. A three-star rat­ing ap­plies to Mus­tang FN mod­els built from De­cem­ber 2017 af­ter changes were made to safety spec­i­fi­ca­tions.

Colour mat­ters too

A study by Monash Univer­sity’s Ac­ci­dent Re­search Cen­tre found that white cars have the low­est in­ci­dence. of risk. Black, blue, grey, green, red and sil­ver cars are lower on the vis­i­bil­ity index and can be up to 10% more likely to be in­volved in a bin­gle.

Will your car’s colour im­pact pre­mi­ums? Kerr says lighter coloured cars can at­tract a marginally lower pre­mium though it’s not just about vis­i­bil­ity. “White cars may be cheaper to re­paint fol­low­ing a re­pair than, say, pur­ple ones,” he adds.

Got a garage? Use it

Where you keep your car also de­ter­mines your in­surance pre­mium, which is why in­sur­ers are so keen to know your post­code be­fore pro­vid­ing a quote.

Across Aus­tralia, Queens­land takes out a num­ber of top spots for car theft, in­clud­ing Bris­bane city, the Gold Coast and Lo­gan City. Take a look at your sub­urb’s ve­hi­cle theft record us­ing the sub­urb snap­shot on the Car Safe web­site. In Mel­bourne, for in­stance, 132 were stolen from St Kilda in the past year while only 63 were nicked from Sun­shine.

De­bunk­ing the myth that car parks are a smor­gas­bord for thieves, the Aus­tralian In­sti­tute of Crim­i­nol­ogy says cars are most fre­quently stolen from res­i­den­tial lo­ca­tions. In fact, a re­port by Bud­get Di­rect found as many as one in three car thefts can oc­cur when crooks steal the keys from a home. (Note to self: don’t leave car keys ly­ing around.) “Garag­ing your car at night will re­duce your pre­mium as the car will be less prone to theft,” says Kerr.

Im­por­tantly, don’t use your ve­hi­cle as stor­age space. A sur­vey by Al­lianz found seven out of 10 mo­torists hide valu­ables in their cars – ei­ther in the boot or un­der a seat or blan­ket. One in three driv­ers reg­u­larly leaves their car un­locked, hav­ing faith that it, and what’s inside it, will be safe. Yet the av­er­age cost for a “theft from ve­hi­cle” claim among Al­lianz cus­tomers is about $2400.

Nick Adams, Al­lianz Aus­tralia chief mar­ket man­ager, says: “We tend to be quite op­ti­mistic and don’t like to think that some­thing could go wrong with one of our prized pos­ses­sions. Leav­ing valu­ables in the car can be a recipe for dis­as­ter. There are al­ways a few easy steps you can take to pro­tect your­self and your car, es­pe­cially sim­ple things like re­mov­ing valu­ables from your ve­hi­cle and en­sur­ing doors are locked.”

Mar­ket or agreed value?

Some in­sur­ers will let you choose be­tween an agreed value and your car’s mar­ket value. Opt­ing for an agreed value will mean pay­ing a higher pre­mium. As a guide, com­pre­hen­sive in­surance on a 2017 Volk­swa­gen Polo for its mar­ket value of $13,800 through AAMI can at­tract a pre­mium of $504 (de­pend­ing on sub­urb, age of driver and so on). Choos­ing the top agreed value of $17,940 lifts the pre­mium to $720 – a 43% hike for 30% ex­tra in­sured value.

None­the­less, there can be good rea­sons to choose the agreed value. As Kerr ex­plains, the agreed value is locked in for the 12 months of the pol­icy.

If your car is fi­nanced through a per­sonal loan, the mar­ket value of the ve­hi­cle could de­cline at a faster rate than the loan bal­ance – new cars drop 19% in value in the first year alone. Un­der these cir­cum­stances, hav­ing your car in­sured for agreed value could avoid the sit­u­a­tion where a hefty amount is still ow­ing on the loan if the car is writ­ten off.

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