How to save money on your car insurance
The golden rule for car insurance isn’t loyalty, it’s comparison. Here’s how, with a little research and some practical changes, you can potentially shave hundreds off your annual car insurance bill.
1. Look out for car insurance deals
Because the car insurance space is so competitive, insurers may offer generous discounts or deals to encourage new sign-ups or customer loyalty.
Here are some common deals and discounts you can expect to see:
Discount | Description | Things to note |
|---|---|---|
Buy online | Many car insurers offer discounts if you buy car insurance online rather than over the phone or in person. | Some providers offer a fixed dollar discount These discounts are generally restricted |
Some insurers offer more than | There is no guarantee that multi-policy discounts will make it cheaper than splitting your policies between different insurers. | |
No-claims bonus | Your insurer may offer you a no-claims bonus or discount if you have a safe driving record and haven’t submitted a claim for a while. | This discount typically increases in value for every claim-free year (up to a max number of years). |
Named driver | Discount for naming all the potential drivers of your vehicle on your policy. | Claims for an unnamed driver often attract a higher excess. |
New customer | Some insurers may offer one-off sign-up discounts to attract new customers. | This is usually expressed as a fixed dollar discount or a percentage off your premiums |
Loyalty | May be awarded to customers | There is no guarantee that the loyalty discount will cost less than policies from other insurers. |
Not all insurers, nor their policies, will offer these discounts. The conditions for each discount will also vary. Always read the fine print or check each policy’s Product Disclosure Statement (PDS).
Don’t be fooled by attractive discounts alone — they can still end up being more expensive than non-discounted policies. That’s why it pays to shop around between insurers to get a feel for the market.
2. Shop around
Shopping around and comparing car insurance policies is arguably the most important saving tip.
For example, your premium could rise significantly each year, even if you remain with the same insurer — this is sometimes referred to as the loyalty tax.
Instead of setting your policy to auto-renew, make it a habit to shop around yearly. Compare car insurance policies, and get quotes from major and minor car insurers.
3. Call your insurer
If you’re short on time, consider phoning your current car insurer, asking for a discount or reduced premium. If you tell them that you’re interested in switching to a cheaper competitor, they may be willing to match a competitor’s price to keep you as a customer.
If this strategy fails, you can simply shop around for cheaper options.
4. Pay annually instead of monthly
Some providers charge lower premiums if you pay your car insurance yearly instead of monthly, but you’ll have to pay a year’s worth of premiums upfront.
While this might be costly for people budgeting month to month, you’ll end up saving more if you can afford the one-off payment.
Canstar’s Group Manager, Research, Ratings & Product Data, Joshua Sale suggests that opting for annual payments can often save you 5-10% over the year.
Alternatively, you could consider choosing a provider who lets you pay monthly at no extra cost.
5. Drive less
If you drive less than a certain distance per year (usually 10,000-15,000 kilometres), some providers will offer you a discount on your premium, usually through a low-kilometre policy. Your premiums may also be lower if you don’t drive during peak hour traffic.
Another option could be a ‘pay as you drive’ policy. These policies cover you up to a certain distance and are generally cheaper than regular policies for infrequent drivers.
However, these policies don’t automatically guarantee an immediate saving. It’s important to assess how much you intend to drive and compare your options.
6. Keep your car secure
You can typically lower your insurance premiums by keeping your car secure. If your car is secure, insurers generally see your vehicle as less likely to be damaged, broken into, or stolen. Therefore, your risk of submitting a claim is considered lower.
Here are some common security measures insurers may recognise:
- Parking your car in a secure location, like a locked garage, carport, or secure parking spot.
- If your car has security features such as an immobiliser, an alarm, and/or satellite tracking.
How much your premiums are lowered (if at all) and what is classed as a secure car will differ from insurer to insurer.
7. Choose a higher excess
An excess is the amount you pay if you need to make a claim, which is agreed on when you take out the car insurance policy.
Some providers permit increasing or decreasing your standard excess level, while others will let you add a voluntary excess on top of your standard excess.
This could further reduce your premiums in exchange for higher out-of-pocket costs when it comes time to make a claim.
If you opt for a higher excess, choose an amount you can comfortably afford if you need to make a claim.
8. Insure your car for its market value
You can generally insure your car for either its ‘market value’ or ‘agreed value’ on a comprehensive car insurance policy.
- Market value: How much your car is worth on the open market at the time of a car insurance claim. It will generally be cheaper to insure your car for its ‘market value’.
- Agreed value: A set value agreed by you and your insurer, regardless of its market value at the time of a car insurance claim.
As most cars generally depreciate over time, the premium for market value will typically reduce as the insurer’s liability decreases. If you’ve opted for agreed value, ensure it isn’t set too high to avoid paying unnecessarily high premiums.
But if you’re insuring a vintage car, its value may appreciate due to its collectability — opting for market value could significantly undervalue it. That’s because it doesn’t account for the cost of restoration, maintenance, or its rarity. In this case, choosing agreed value could secure you a fairer payout. The agreed value can also be renegotiated with your insurer when you renew.
9. Choose your car insurance extras carefully
Extras refer to optional add-ons, which provide broader coverage at an additional cost. The more extras you add to your policy, the more expensive your premiums.
Common extras include:
- Windscreen cover: Helps cover windscreen replacement or repairs if damaged or shattered from an insured event. Exclusions may apply.
- Hire car cover: If your car is involved in an accident, this extra provides you with a temporary replacement car while waiting for your car to be repaired/replaced.
- Roadside assistance: Provides roadside support, such as on-site repairs or towing your vehicle to a mechanic, if your car is experiencing technical issues on the road.
An extra may not be worth it if you’ve never had to use it throughout the time you’ve paid to maintain it. Plus, you’ll most likely have to pay an excess to submit a claim.
Consider whether these extras are worth the additional cost. For example, if you drive for long hours on rougher roads, your car may be at higher risk of windscreen damage from the coarser terrain— windscreen cover may be worth it in this instance.
