Short-Term Car Insurance: What Are Some Options?

11 May 2020
Even if you don’t drive often, or you are planning on driving your car for a short distance, it could be worth considering taking out a comprehensive car insurance policy. Here are some of your options for short-term comprehensive car insurance.

If you don’t want to commit to a year-long comprehensive 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 is typically designed to provide the benefits of comprehensive car insurance, but potentially at a lower cost for people who don’t drive a lot. Pay-as-you-drive cover typically 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 potentially be an option to consider 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 typically also allow you to pay to ‘top up’ your kilometres, which could potentially make 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 appear to have similar application processes. Typically, the applicant:

  • Contacts the insurer, either online or by phone, and provides them with all necessary details about the applicant and the amount they plan to drive.
  • Assuming the applicant qualifies for cover, the insurer will give the applicant a quote based on driving history and nominated number of kilometres.
  • If the applicant decides to proceed from there, they typically need to disclose the car odometer’s current reading to the prospective insurer:
    • The insurer should add your nominated number of kilometres to the applicant’s current odometer reading to calculate the ‘end odometer reading’ for the purposes of the new policy.
    • If the applicant is nearing the ‘end odometer’ reading before the end of the policy term, the policy holder can typically contact the insurer to ‘top up’ the kilometres allowed under the policy.
    • If the policy holder makes a claim and the odometer is in excess of the policy’s end odometer reading, the policy holder could typically be required to pay a surcharge for this, on top of the 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, the policy holder would 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.

Another potential 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. There is the potential that you could 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.

It is important to note that if you plan on driving a car on a public road, that car must be registered and have Compulsory Third Party or Green Slip insurance. CTP insurance is legally required to register your car and is an included cost of vehicle registration in most states. The legal liability for injury or death from an accident can stretch into hundreds of thousands of dollars, which is why CTP insurance is considered necessary. Rules differ between states and territories.

Option 2: Paying monthly on a standard car insurance policy

Another option, which may potentially offer more flexibility, is taking out a standard car insurance policy that allows you to make monthly or fortnightly premium payments, as well as offering the ability to cancel the policy 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. 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 typically incur a fee for cancelling your policy early, and depending on the policy you take out, the fee could potentially be quite high. Additionally, if you only require insurance for a short period, even if you’re paying in smaller monthly instalments you may potentially 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 it is possible that you could have paid more than if you had paid for a whole year upfront.

If you’re considering car insurance policies, the comparison table below displays some of the policies currently available on Canstar’s database for a 30-39 year old male seeking cover in NSW without cover for an extra driver under 25. Please note the table is sorted by Star Rating (highest to lowest) followed by provider name (alphabetical) and features links direct to the providers’ website. Use Canstar’s car insurance comparison selector to view a wider range of policies.

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 could also potentially be the most expensive, depending on how far you will be driving and for how long you need the car.

Hire cars typically come with an opt-in insurance policy pre-arranged by the company providing the vehicle. However, along with various once-off fees you may be required to pay, hire cars typically have a daily hire cost that could potentially quickly stack up depending on the length of time you need the vehicle. It is also a wise idea to carefully 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 do decide that insuring your car is the best option for you, you can compare car insurance policies with Canstar:

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