Car insurance policies

After some simple ways to save on your premiums?

Voluntary excess increase

Some providers will lower your premium if you take on a higher excess. If you do take a higher excess, don't make it higher than you could comfortably afford to pay if you had to make a claim.

No-claims discount

Most policies offer a no-claims discount on your premiums. This is “stepped” – the more years without a claim, the higher the discount – and you can reach a maximum discount of around 60 to 65% after 4 or 5 years of claims-free motoring. The discount can save you hundreds of dollars on your annual premiums.

Your no-claims discount won’t necessarily be affected if you have to make a claim. For instance, most providers won’t penalise you if you’re not responsible for a crash and you can supply the other driver’s registration and contact details. Claims for broken windows and lost keys aren’t always tied to the discount either.

Other discounts

Ask about any other discounts, such as:

• Having other insurance policies with the company can save you up to 20%.
• Having an alarm fitted.
• Parking your car in a garage.
• Restricting the policy to named drivers.
• Being over a certain age.
• Paying an annual premium by direct debit.

Bargaining

If you like your existing company but it's not cheap, try bargaining – ask if it will match another's quote before deciding whether to leave.

We asked insurance providers to quote monthly premiums for 4 profiles: young person, middle-aged person, older person and family of 4.

• Young person - age 23 and wants to insure a 2006 Toyota Corolla GL for $5750.
• Middle-aged person - age 45 and wants to insure a 2012 Honda Civic for $18,250.
• Older person - age 70 and wants to insure a 2010 Mazda Axela for $12,500.
• Family of 4 - consists of dad (50), mum (50), son (19) and daughter (17). They own a 2012 Subaru Outback Premium worth $25,000.

The premiums listed are for comprehensive policies and include no-excess windscreen cover.

We’ve made these assumptions:

• Our drivers are fully licensed – except for the son and daughter in our family of 4 (they hold restricted licences).
• None of our drivers has been convicted of a driving offence.
• None of our drivers has made a claim in the past 5 years.
• The cars are fitted with alarms and usually parked in a residential driveway. They’re not modified or used for business purposes.
• Apart from our young person and the teenagers in our family of 4, no one under 25 will drive the cars.

Some companies offered discounts if:

• No unnamed drivers under 25 drove the car.
• Only those named on the policy drove the car.
• The drivers had been claim-free for a certain number of years.
• The car had an alarm.

We accepted these discounts.

Insurance policies for your house, contents, car or travel contain a clause that reads “you must always take reasonable care to avoid circumstances that could result in a claim” or words to that effect.

To decline a claim under a clause for reasonable care, your insurer must prove you were grossly careless, negligent or reckless. It can’t decline your claim for run-of-the-mill carelessness. The Insurance and Financial Services Ombudsman (IFSO) said “this is because insurance, by its very nature, protects the insured against negligence and mere inadvertence”.

So how does an insurer prove gross negligence? According to IFSO, it looks at the circumstances leading up to your loss and asks “would a reasonable person have run the same risks?” If the answer is “no”, it can decline your claim.

In addition, the benchmark for “reasonable care” depends on circumstances such as where an item was left and for how long. There’s a difference between leaving your baggage unattended in the locked boot of your car for 10 minutes and leaving it on the passenger seat overnight.

With this in mind, you can challenge your insurer if your claim is declined for failing to take reasonable care. All insurers must belong to an independent dispute resolution scheme such as IFSO or Financial Services Complaints Limited. If you and your insurer can’t settle the dispute, you can refer it to the applicable service.

When a disagreement arises with a car insurer, policyholders may turn to the office of the Insurance and Financial Services Ombudsman (IFSO) Karen Stevens to resolve a dispute. Last year, nearly 1000 vehicle owners contacted the office with car insurance issues. We asked Ms Stevens for her advice on reducing the risk of a claim being rejected. Here are her tips:

• Review your policy. “Ask yourself: do you understand the policy and what you are – and aren’t – covered for? People often think they have agreed value comprehensive policies when they have market value. So they have an accident and their car is written off, they think they will get the $20,000 cover that was on the original application, but they only get what the car would have sold for prior to the incident, $10,000.”
  
• Check the listed value. “For agreed and market value policies, make sure the ‘sum insured’ is realistic – this may affect your premiums. If you disagree with your insurer’s valuation when setting up your policy or making a claim, get your own independent valuation.”
  
• Disclose everything. “When applying for insurance, answer all questions and provide accurate information. When you renew your policy you must tell your insurer if anything has changed in the last year, including any convictions, or if you modify your vehicle. Claims can be declined if you haven’t told the insurer all the information you are required to.”
  
• Obey the road rules. “Comply with your licence and don’t drive under the influence. Insurance claims are likely to be declined if there is an accident while you (or a driver of your car) drive in breach of your licence conditions or under the influence of alcohol or drugs. This means that the damage to your, or any other, vehicle won't be covered by insurance. Make sure you warn all drivers about this (especially those without a full licence).”
  
• Be truthful in claims. “Think twice before you exaggerate an insurance claim. The long-term consequences of insurance fraud are hard-hitting. Declined claims are the tip of the iceberg. If your insurance policies are cancelled, and your name is listed on the Insurance Claims Register, it can be difficult to get future insurance. This can be devastating, for example, if you’re trying to buy a house.”