Drive a better deal

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

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.