Things to check at car insurance renewal time

11-minute read

What you'll learn

• How car insurance premiums are calculated
• Why your insurance premium might have increased
• Types of car insurance and optional extras available
• The process of renewing your policy
• Managing car insurance policies

 

Taking a closer look at your car insurance cover to see if it still meets your needs can help make sure you’re adequately protected, it can also uncover potential savings and help you avoid any surprises in the event of a claim. Read on, you never know what you’ll discover.

Understanding car insurance premiums

It’s likely the first thing you’ll notice when you receive your car insurance renewal notice is the premium. Renewal time is a great opportunity to understand how insurance premiums are calculated and what can affect them.

How car insurance premiums are calculated

Car insurance premiums are made up of a number of factors, combined with some statistical data. Car insurance companies use this information to help them predict how likely you are to make a claim. The higher the risk, the higher the premium is likely to be.
 

Risk factors include:

• Your age and gender – Younger drivers (17-25) are statistically more likely to be injured or killed in a road accident*, most likely due to their lack of experience. At the same time, data shows that males under 30 years old are more likely to make claims when compared to their female counterparts.^
• Where the vehicle is kept – Cars located in urban areas with higher traffic and crime rates may have higher premiums than those in rural areas. Having your car in a locked garage rather than parked in the street can also have an impact on premium cost.
• Level of car insurance cover you choose – Whether it’s comprehensive cover or third party insurance, the more cover you have with your policy, the higher the cost is likely to be.
• Previous claims history – If you’ve made frequent claims or claims of high value, you could be considered a higher risk and it’s likely you’ll pay more for your car insurance.

What role does driving history play?

An insurer may take into consideration certain details about your driving history including how long you've held a driver's license, your driving habits including any traffic offences or infringements you’ve had, and the number of accidents you've been involved in where you were at fault.
 

This information can help the insurer to work out how much risk you pose as a driver which, in turn, can affect the cost of your premium.

Vehicle details – why are they important?

The make and model of your vehicle can influence the amount you pay to insure it. High-performance or luxury vehicles may incur higher premiums partly due to the repair and replacement costs involved. The age of the vehicle may also play a part in the cost of your car insurance.
 

If you’ve installed any additional safety features this may also help reduce your premium. It’s important to be completely transparent about your vehicle when you take out an insurance policy or make any changes to it.

Possible reasons for premiums changing

When you receive your insurance renewal notice, you may notice that your premium has changed. Whether it’s gone up or down, there are several reasons this might happen:

1. You made a recent claim. If you’ve made a claim during the year, your premium could rise, this is especially so if you were at fault.
2. Your risk profile has changed. Things like moving to a higher risk area or even losing points on your license due to speeding offences, can affect your overall risk profile and may impact your premium too.
3. You adjusted your policy. If you make changes to your cover or choose a different level of excess payment required, your premiums could also be affected.
4. Inflation and market conditions have changed. The rising cost of repairs or an increase in vehicle theft rates may mean your insurer needs to adjust premiums accordingly.
5. Your personal circumstances have changed. Buying a new car, moving to a new location or even reaching a particular age could all have some impact on what you pay for your car insurance. 

Types of car insurance available in Australia

In Australia, there are various types of car insurance, each providing a different level of protection for your vehicle (and for you). When you are renewing your car insurance, it’s important to make sure it’s still right for your financial situation and needs.
 

Here are four of the main types of insurance available in Australia:

Compulsory Third Party (CTP) insurance

Also known as ‘Green Slip insurance', Compulsory Third Party (CTP) insurance is a mandatory cover required for your car registration. It provides compensation for injuries or death caused to other people if you are at fault in a motor vehicle accident. There are several  insurance providers to choose from when it comes to CTP insurance but they vary from state to state.  That means, if you’re going to do a comparison, you’ll need to research which insurers are available where you live.
 

A CTP insurance policy does NOT cover damage to property or vehicles (yours or others).

Third Party Property Damage insurance

This type of insurance provides cover for damage caused by your vehicle to someone else’s property, like their car, house or a fence.
 

Third party property does NOT cover any damage to your own vehicle unless your insurance cover includes an uninsured motorists extension. This usually comes with conditions and is capped at a certain amount, plus it could involve paying a slightly higher premium.
 

This type of car insurance is often chosen by owners of older cars with lower market value who want to minimise the cost of their insurance while still being protected against significant third-party insurance claims.

Third Party Fire and Theft insurance

Third Party Fire and Theft cover sits in the middle ground between Third Party Property Damage and comprehensive cover. It offers the same (or similar) coverage as Third Party Property Damage with added protection for if your car is stolen or damaged by fire. Not all insurance providers offer Third Party Fire and Theft insurance, but theft cover and Third Party Fire can be a good option for those who live in areas where this may be a concern.

Comprehensive car insurance

Having complete cover for a car can mean different things for different people, so it’s important to think about what you need for your vehicle. Comprehensive car insurance provides the highest level of coverage available (and is the most expensive). It covers damage to your own vehicle as well as to other people’s property and vehicles, no matter who is at fault. Of course, there are exclusions for things like unlicenced drivers or those under the influence of drugs or alcohol, so make sure you check with your insurer what’s covered and what’s not.
 

What’s included with comprehensive car insurance can differ between insurers, but it typically covers damage from accidents, vandalism, weather events (storms, floods, hail etc) and may add options like windscreen replacement, roadside assistance or cover for hire cars.
 

A comprehensive policy can provide protection in a wide range of scenarios and is ideal for situations where the cost of repair or replacement would be significant.
 

For more details about any of the above types of car insurance, you can ask for the product disclosure statement from your chosen insurance provider.

The renewal process for car insurance policies

Renewing your car insurance policy is important to maintain continuous coverage. It’s also a great opportunity to review your insurance to see if it still suits your financial situation and needs and make any necessary adjustments.
 

Here’s how a typical renewal process might work:

1. Receive your renewal notice

Your renewal notice will be sent to you before your policy expires and will outline the terms of your new policy, including the premium, details of coverage and anything that’s changed from the last year.

2. Review the renewal offer

You should carefully check your insurance details including the premium amount, cover options, the excess amount and any exclusions or conditions that may have changed, and make sure the policy still meets your needs.

3. Compare car insurance providers

You can use this as an opportunity to get quotes from multiple providers to make sure you’re getting the most suitable cover for your needs and budget. In some instances, switching to a new provider or adjusting your cover could help save on premiums.

4. Decide to renew (or switch)

If you’re happy with the renewal offer, you can then proceed to renew your policy. Alternatively, you can make changes to your current policy or switch to a new provider. It’s entirely up to you. It's a good idea to double-check your vehicle registration details, your address, contact details and driver details because incorrect or outdated information could lead to a denied claim or having your policy cancelled.

5. Complete the renewal process

The steps to renew your car insurance will be outlined in your offer – and, depending on the insurer, this may be able to be done online, over the phone, by post or in person. You can usually pay using credit card or direct debit from your bank account.  

 

Managing your car insurance

No matter where you live in Australia, from WA to Tasmania to New South Wales, you can use the following tips to help effectively manage your car insurance to make sure you have enough cover while minimising costs.

Four tips to make sure you get the value you need

TIP 1: Shop around.

Before you automatically renew with your current car insurer, it is a good idea to compare car insurance quotes from others to see if you could get a more competitive rate. Keep in mind that you need to check the details of the cover to make sure you aren’t compromising on coverage.

TIP 2: Review your coverage.

If your car is older or has depreciated significantly, you could consider reducing your coverage amount. This is one strategy you could use to help manage your premium.

TIP 3: Consider changing your excess.

You may be able to lower your premium by increasing your excess payment (the amount you pay out-of-pocket if you make a claim). Agreeing to a higher excess payment generally results in a lower premium because you take on more of the financial risk. However, it’s important to choose an excess amount you are comfortable with and that you can afford if you need to make a claim.

TIP 4: Drive safely.

Maintaining a good driving record is an effective way to help keep premiums low. Ask your insurer about whether they offer a no-claim bonus.

Keep your details up to date

Regularly reviewing and updating your policy details is essential for ensuring that your coverage aligns with your current circumstances.

• Change in address. Moving to a new suburb or city may impact your premium due to a change in risk.
• Change in vehicle usage. Less regular driving can have an impact on your risk profile, so if you change jobs, start working from home or start using public transport more often you could see a reduction in premiums.
• Adding or removing drivers. If there are changes to the regular drivers of your car, you should tell your insurer. Some car insurers may have age restrictions on drivers, so adding a younger or inexperienced driver could increase your premium, while removing them could lower it.
• Vehicle modifications. Inform your insurer about any modifications you make to your car as these can sometimes affect premiums (or even void your policy).

Optional cover

When you renew your car insurance, you need to consider any optional covers you have to see if they are still right for your situation, or think about any that might be available that could fit your needs. Cover options can provide additional protection and flexibility allowing you to tailor your policy to your needs.
 

Here are some common options you might come across:

Agreed value vs Market value

Comprehensive car insurance may include the option to insure your vehicle for either its agreed value or market value.

• Agreed value is a predetermined amount agreed on by you and your insurer at the start of your policy. It remains fixed for the term of the policy and provides more certainty in the event of a total loss. The only catch is that premiums for agreed value policies can often be higher.
• Market value covers the car for its current market value at the time of a claim, taking into consideration depreciation and wear and tear. Premiums are generally lower for market value policies, but the catch here is that the payout may be less than expected if you need to make a claim.

Factors to consider when deciding between the two include your car’s age, it’s condition and any market depreciation. For newer or more valuable vehicles, agreed value might offer more peace of mind, while market value might be a more cost-effective option for older vehicles.

Additional coverage options

On top of the standard cover, many insurers offer optional extras to provide further protection for your vehicle. Some insurers may include these as standard in your cover, but others offer them as an optional extra allowing you to tailor your cover to your individual needs. Be sure to talk to your insurer about what’s available to you and what the implications might be to your premium.

• Windscreen and glass coverage
  Provides protection against the cost of repairing or replacing your car’s windscreen, windows or sunroof. Some insurers offer this cover with no excess (or low excess) making it a popular choice for drivers who want to avoid the out-of-pocket expense of glass repairs.
• Hire car coverage
  This provides a replacement hire car if your car is stolen or being repaired due to an accident covered by your policy. Some insurers may offer this as a standard feature, while others provide it as an optional extra.

Choosing your repairer

In Australia, some car insurance providers allow you to choose your own repairer in the event of a claim, while others may require you to use an approved repairer.

• Approved repairers. If you go with an insurer-approved repairer you could benefit from guaranteed repairs and possibly lower repair costs as often negotiated by car insurers. However, your choices may be limited.
• Choice of repairer. A policy that allows you to choose your own repairer offers the flexibility to choose a trusted mechanic to handle repairs or one that is nearer to your home.
   

Reviewing your car insurance is more than just a routine task – it’s an important opportunity to help make sure you have the right coverage for your situation and needs. By understanding how premiums are calculated, exploring the different types of car insurance coverage, reviewing your renewal options and considering your options and extras, you can make informed decisions.
 

By managing your car insurance effectively, including keeping your details up to date, you could also potentially save money on premiums. So, when you receive your renewal notice from your current insurer, take some time to evaluate your policy thoroughly, compare the options available and make any necessary changes to your policy, that way you can make sure you have enough protection for your vehicle, your passengers and yourself.