Top 10 Car Insurance Traps

Top 10 Car Insurance Traps

Car insurance can be a tricky business, particularly when you’re trying to work out which insurer is best for you.  Here’s our top ten list of things to consider when selecting an insurer.

1. Level of cover

One of the first things you need to do is check how much cover your insurer will provide if you are in an accident.  It can be the difference between being fully covered, and walking away with a hefty bill.

2. Shop around

The saying ‘it pays to shop around’ never grows old because its true.  Competition in car insurance is strong, with a number of relatively new players now in the field such as Woolworths and Coles, who are competiting for business based on price. Whoever you decide to go with – whether its the cheapest or the most expensive – go through the fine print to make sure it includes everything you need. 

3. Choose your own adventure

These days, there’s an increasing number of added extras and options to pick from when selecting car insurance. It’s worth considering options such paying month-by-month, if you need it, but be prepared to pay a little bit more for the convience. Conversly you can save money by limiting the flexibility in your cover, such as nominated-driver-only cover or increasing your excess to reduce the premium.

4. Communication

You never know when you might need to contact your insurer, so try and pick one who is contactable by phone (preferably 24/7),  and has plenty of information online about your policy and what to do after an accident.

5. Repairs guarantee

Ask if the insurer offers a lifetime guarantees for workmanship on collision damage. Check the fine print though, and don’t forget to ask for new parts if it’s a new car. A lot of insurers offer “new for old” replacement of your car if its under a certain age.

6. Agreed or market value choice

The value of your car can become a point of contention when you go to make a claim, and often it comes down to whether you selected an agreed value when taking out the insurance, or whether you chose to accept the ‘market value’ of the car, as determined by the insurer. At the end of the day, the higher in value your car is, the more in insurance you’ll pay.  Also, there are some interesting hybrids around the insurance market which merge these terms, so be sure that your “agreed value” is not actually market value, up to that agreed amount.

7. Lifetime rating 1

The days of Ratings 1 to 6 seem to be ever diminishing, to the ultimate point where all policies will be underwritten as “Rating 1”, but again, as there are several variations on the lifetime rating theme, it’s important to check the details.

8. Hire car

Complimentary use of a hire car has been around a long time for cars stolen but unrecovered, (where the claim has been admitted). The offering of hire cars has been widened quite significantly however, so don’t forget to ask if one is available.

9. Low Risks

Insurers are free to adopt certain “Underwriting Guidelines” to basically target any segment they wish. Age, driving history, car use, postcode and whether your car is garaged or not can affect your premium, so if you are considered “low risk” – use it to your advantage and shop around. 

10. High Risks

Some drivers and cars will be “hard to place risks” so far as insurance underwriters are concerned, but there are some insurers out there that specialise in high risk candidates.

This article originally written in 2008 by Ross Lee, principal of Lee Lawyers, specialising in insurance law and injury claims.

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Learn more about car insurance

Does insurance cover a stolen car if keys were in the car?

A car insurance policy that covers the theft of your car, such as third party fire and theft insurance, usually covers a stolen car, even if the keys were in the car’s ignition.

However, your insurer may deny the claim if you live in an area where there have been several car robberies reported recently. They will see you leaving the keys in the car as a case of negligence. In such cases, your insurance provider may even expect you to have installed anti-theft security measures in your car. 

You may need to confirm whether or not you left your keys in your car, and if they had been stolen or misplaced, before filing your car insurance claim. The loss or theft of your car keys may be covered by a comprehensive car insurance policy, but usually as an optional item.

If you can confirm that your car keys were stolen, mention this in your claim as this will help establish that your car was not stolen as a result of your negligence.

Can you insure your car for 6 months?

Most Australian insurers won’t offer you a 6-month car insurance policy, so you may need to buy a policy that covers your car for damages and cancel it after six months. You will need to purchase comprehensive car insurance to protect your car from accidental damage, theft, vandalism, or natural disasters.. 

Consider checking whether your 6-month comprehensive car insurance will cost more if you pay monthly or six-monthly premiums instead of a one-time annual premium. Another question to ask the insurer is whether you’ll need to pay administration or cancellation fees when you cancel the policy.

Alternatively, you can look for a suitable ‘pay as you drive’ car insurance policy, which usually offers you the coverage of a comprehensive car insurance policy but only requires you to pay for the distance driven. Such a policy may not be the ideal 6-month car insurance plan as it is based on how much you drive rather than for how long. If you need to drive a lot, you may end up paying more than you’d pay for regular car insurance.