Short-Term Car Insurance: What Are Your Options?

Even if you don’t drive often, or you are planning on driving your car a short amount of time (such as driving a new car to your home), an insurance policy that covers you is worth considering. Here are some of your options for short-term car insurance.

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If you don’t want to commit to a year-long car insurance policy for financial or practical reasons, there are some options you might like to consider that could be more relevant to your driving habits, such as:

  • A pay-as-you-drive car insurance policy
  • Choosing a car insurance policy where you can pay monthly and cancel the policy at any time
  • Renting a car

Here are some of the ins and outs of each option.

Option 1: Pay-as-you-drive car insurance

This is a type of car insurance policy designed to provide the benefits of comprehensive car insurance, but at a lower cost for people who don’t drive a lot. Pay-as-you-drive cover only requires you to pay for the kilometres you plan on driving in a certain period (usually a year).

While most pay-as-you-drive policies have a year-long term, they may still be a good option if you only require car insurance for a short period. You could just arrange cover for the kilometres you think you’ll drive in that short period. Most pay-as-you-drive policies also allow you to pay to ‘top up’ your kilometres, making them a fairly flexible option for the occasional driver.

How do I apply for a pay-as-you-drive car insurance policy?

The handful of Australian insurers who offer pay-as-you-drive car insurance have similar application processes:

  • You’ll need to contact the insurer, either online or by phone, and provide them with all necessary details about you and the amount you plan to drive.
  • Assuming you qualify for cover, they’ll then give you a quote based on your driving history and your nominated number of kilometres.
  • If you decide to proceed from there, you’ll need to disclose your odometer’s current reading to your prospective insurer:
    • They should add your nominated number of kilometres to your current odometer reading to calculate your ‘end odometer reading’ for the purposes of your policy.
    • If you’re nearing your end odometer reading before the end of your policy term, you can typically contact your insurer to ‘top up’ the kilometres allowed under your policy.
    • If you make a claim and your odometer is in excess of your end odometer reading, you’ll most likely need to pay a surcharge for this on top of your standard excess and any other excesses or fees that may apply at the time.
  • If the application is approved and the policy is in place, you’ll be ready to drive (or not drive as the case may be).

Do pay-as-you-drive car insurance policies have any drawbacks?

The main potential downside of a pay-as-you-drive car insurance policy is that it requires you to plan ahead for quite a considerable period of time, generally around a year. Circumstances out of your control may lead to you having to drive more than usual in any given 12-month period, so you could have to pay for either additional kilometres or an ‘out of odometer’ excess. This can add to the overall cost and should be considered before taking out a pay-as-you-drive policy.

The other difficulty with a pay-as-you-drive policy can be estimating the kilometres you’ll drive over the course of an entire year. Unless your driving habits are set in stone, you may find it difficult to accurately estimate how many kilometres you drive annually – especially if you’re taking out a pay-as-you-drive policy because you need insurance for a short period, in which you’ll presumably be driving more than usual. You may end up having to make a very generous estimate to be on the safe side, which may in turn lead to a higher-than-desired premium, which may not compare as favourably as you’d hoped with the costs of a standard car insurance policy.

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Option 2: Paying monthly on a standard car insurance policy

Another option, which may offer more flexibility, is taking out a standard car insurance policy that allows you to make monthly or fortnightly premium payments and cancel at any time (albeit usually for a fee).

We’ve already done some of the legwork for you and written about the car insurance providers we rate who allow you to pay monthly at no extra cost; you can read that here. These insurers offer policies on which you can split your premium into 12 monthly payments rather than paying one large sum for the year. Some insurers may then allow you to cancel your policy after the short period you required car insurance for has ended.

However, there are a few things you may want to consider before committing to this plan of action. The first is that you will most likely incur a fee for cancelling your policy early, and depending on the policy you take out, the fee could be quite high. Additionally, if you only require insurance for a short period, even if you’re paying in smaller monthly instalments you may end up paying more for insurance than you would have liked. If you end up paying monthly and keeping the policy for 12 months, you likely have paid more than if you had paid for a whole year upfront.

The table below shows a snapshot of car insurance policies that allow you to make monthly payments at no extra cost, showing results for males aged 30-39 living in Queensland with no extra driver under the age of 25.

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Option 3: Renting a car

Your third option is to simply hire a car for the short period over which you require an insured vehicle. This option is perhaps the most straightforward, but it will also likely be the most expensive, depending on how far you will be driving and how long you need the car for.

Using a hire car is a simple option because hire cars usually come with an opt-in insurance pre-arranged by the company providing the vehicle. However, along with various once-off fees you may be required to pay, hire cars have a daily hire cost that can quickly stack up depending on how long you need the vehicle for. You also should check the type of insurance that comes with the car. Sometimes the policies have a number of exclusions, or you may need to pay a high excess (sometimes a few thousand dollars) if you have to make a claim.

If you only need an insured vehicle for a short period of time, hiring a car may be your best bet, but otherwise it’s likely to be more expensive than insuring your own vehicle.

If you do decide that insuring your car is the best option for you, you can compare car insurance policies with Canstar in order to try to find a great-value policy.

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