With over 17 million cars on Australian roads, most people understand that a comprehensive car insurance policy is a good idea. The question then becomes, how much will it cost us?

Car insurance varies vehicle by vehicle, and driver by driver, and it’s often the case that drivers will take out cover but not fully understand exactly how their insurer arrived at their pricing decision.

Let’s fix that right now! We explain how your premium has been calculated, and then take a close look at the factors that could help reduce this cost.

Key factors that affect your car insurance premium

Age of driver

Young drivers are reportedly involved in more accidents than their elders. This means if you have young drivers on your policy, your premiums may be higher, given their risk profile. In many circumstances, drivers are considered ‘young’ if they’re aged 25 years of age or under, although on some policies the bracket can extend to 30, even 40 years of age. If you don’t need to insure any young drivers, shop around for a policy that offers a discount for older/more experienced drivers (i.e. driver age exclusion).

The vehicle you drive

If you’re eager to keep your car insurance premiums to a minimum, one of the most important decisions you’ll have to make is selecting your car. Insurance premiums vary depending on the type of car you drive. Consider the following…

  • High-powered / performance vehicles can carry higher premium rates because they’re associated with risky driving behaviour. Modifying your vehicle to affect its speed or handling will usually result in more expensive insurance.
  • As a general rule, if the car is expensive to replace, it’s expensive to insure. European and specialty cars, for example, can be exceptionally costly to insure.
  • Vintage cars may be even more expensive to insure, and may require specialty insurance.

Where you park your car at home

Your insurance premium will vary depending on your car’s ‘home’ postcode. Some areas are safer than others and insurance companies may take this into account when calculating your premium. Cars parked in off-street carports, garages and secure parking bays may carry a lower risk than vehicles parked on streets and in unsecured parking areas.

It’s important to make sure you inform your insurance company if your circumstances change (e.g. you move house); in some cases, it may even reduce your premium if you move to either a safer neighbourhood or to a home with a lockable garage.

Your insurance excess

Your excess payment is a ‘customer contribution payment’ that an insured person (that’s you) needs to make in the event of an at fault claim. Generally speaking, the higher your excess payment, the lower your premium can be. However, think carefully before making your excess payment too high, as you don’t want to put yourself in a bind later on if you cannot afford it

Market value insurance

If you insure your vehicle at market value, it is sum insured for whatever the value of an identical car is (e.g. the same make, model, age and condition). This is assessed at the time you claim. If

The type of driver you are

Are you a careful driver, or do you live on the edge? The kind of driver you are makes a huge difference to your premium.

  • Low kilometre drivers (e.g. retirees, inner city dwellers) can benefit from a cheaper insurance premium. Less time on the road means they’re less likely to get into an accident!
  • If you’re using your vehicle for business uses, you may attract a higher premium. Additionally, your occupation may have an impact on your premium calculation.
  • You’ve probably heard of ‘safe driver’ or ‘no-claim’ bonuses. You may qualify for such a bonus (which comes in the form of a reduced premium) if you have not made an at fault claim against your policy for a set period of time.

Be aware that if you are involved in an accident and you need  to make a claim, you could lose your no claim bonus. However, if you have ‘rating protection’, your no claim bonus will not be negatively affected from making at fault claims.

Finally, a word of caution. When purchasing your car insurance remember to disclose all information that is being asked of you in relation to your driving and claims history to ensure that you are covered and covered for the correct amount.

The types of insurance you take out

The type of car insurance cover you choose has an enormous impact on your premium. There are a few different types you can take out.

  • Third party property insurance will protect you for the cost of repairs or replacement to third party property in the case of an accident. This means that if you are involved in an accident, your insurer will only pay for repairs, damages or replacement to third party vehicles / property involved in the incident (i.e. cars and property not owned by you).
  • Third party fire & theft protects you in a similar way to Third Party Property insurance, but also includes cover for fire & theft related incidents (up to a certain amount) for your own vehicle. In some cases, Third Party Fire & Theft will also provide cover for damages to yourown vehicle if you are involved in an incident with an uninsured driver, where they are at fault.
  • Comprehensive car insurance is exactly what it sounds like – comprehensive! It covers you for damage to your car, damage you cause to third parties, and any associated property damage. It provides further cover for theft, fire related damage, flood, storm and hail related damage, and potentially a hire car in the event your car has been stolen (all of which depends on your insurer and which policy you hold).

Whether or not there’s finance on the vehicle

One of the final things insurers may factor into their calculations is whether or not there’s any outstanding finance on your car (i.e. you took out a loan to purchase it).

In summary

With so many car insurance options, it’s important to consider your specific requirements and circumstances before comparing policies, to make sure you choose one tailored to your needs. Shop around before you buy and remember – always read the Product Disclosure Statement (PDS), as every policy differs slightly.