Car cover bonuses not all rewards

EIGHT out of 10 car owners have comprehensive car insurance, and not surprisingly, research by comparison site Choosi shows “car insurance” is one of the top online search terms across the insurance market.

But if you’re taking out or renewing comprehensive cover, don’t let a “no-claim discount” drive your choice.

It’s worth clarifying that comprehensive insurance is very different from compulsory third party ( CTP or “greenslip”) cover.

CTP insurance covers death and injury to people if you are involved in an accident, and it is illegal to drive a vehicle that isn’t covered by CTP. Comprehensive cover is optional – though sensible because it offers financial protection for your car and other people’s property if your vehicle is involved in an accident or stolen.

A common feature of comprehensive car cover is noclaim bonuses, also known as no-claim discounts. These came under the spotlight with the Australian Securities and Investments Commission, which dished up some interesting findings.

No-claim bonuses are generally presented by insurers as a reward for good driving, and the discounts they offer can seem attractive.

However, ASIC’s research found among most insurers, between 90 and 99 per cent of comprehensive policy holders have the highest no-claim discount rating.

It also found that if you made a claim on comprehensive car insurance for something that wasn’t your fault, you could still face a higher premium — even though your no-claim bonus was unchanged. Following the review, ASIC recommended insurers provide better disclosure about how no-claim bonuses work.

It makes sense to see if you could get a better deal elsewhere, and a choice of comparison sites makes this easy.

Or pick up the phone, let your insurer know you are shopping around and ask for their best price.

For more information, visit the MoneySmart website (moneysmart.gov.au) or look at my book Making Money.