How I slashed my car insurance premium by more than 40 per cent
Jessica Irvine
I have reduced my annual car insurance premium by 44 per cent, from $886 to $495.
And I’m about to tell you how. However, first, a matter arising from last week’s column on how I cut my home contents insurance premium in half.
You can save on the premium cost by increasing the excess payable in the event of a claim.
Several readers emailed to warn me of a clause in some insurance policies regarding “underinsurance”. On such policies, should you only insure a sum of, say, $50,000, but a valuer later assesses your property at $100,000, the insurer can apply an “averaging” clause to say that because you are only half insured, they’ll only pay out half your insured amount. Ouch.
I’m confident this does not apply to me but it’s definitely something to watch out for.
Now, onto car insurance.
Last week, I rang the former competition tzar Allan Fels, who has just finished his review of home insurance premiums.
After stressing to me – albeit in a jovial manner – that he wasn’t much inclined to get involved in my personal financial affairs, he did offer a strenuous general warning about the perils of the “loyalty tax” insurers charge.
“Typically,” says Fels “you pay low in Year 1, and in Year 2 – without really telling you – they put it up a lot.” This difference between premiums charged to new versus old customers consistently ranged between 20 per cent and 33 per cent, in Fels’ review of home insurance pricing.
Huh, I said. That could explain a funny thing which happened when I rang my car insurer recently to change my policy.
After advising that I’d like to alter my comprehensive policy, the consultant said, seeing as I was mid-way through an annual policy, he’d have to cancel that existing policy, issue me a refund, and set me up a new policy. Sure, I said.
As he worked the system, he warned me that, given recent events, including bushfires and COVID, my new premium may be higher.
But, to his apparent surprise and definitely mine, after punching in details with the same features as my old policy, the system spat out an annual premium costing $213 – 24 per cent less.
Huh. And that’s despite supposedly having a 15 per cent “loyalty discount” applied to my policy all along. Double huh.
After pocketing that saving, I then requested the alterations to my policy I had originally called for…
This article is from the Sydney Morning Herald, you can read the full article here: