Your Money

Dropping your car insurance cover could potentially put you at risk

- February 16, 2024 4 MIN READ
Opting out of car insurance

Drivers are ditching comprehensive car insurance and I get it, money is tight. But ditching, rather than switching, could cost you plenty down the track.

Owning and maintaining a car can be one of the biggest contributors to the household bills, but according to new research from Compare the Market (where I am Economic Director) 17.4 per cent of drivers surveyed have ditched comprehensive car insurance in the last 12 months. 

Look I get it. Money is tight, the bill comes in and you think “I’m a safe driver, this is a waste of money”. But as the old saying goes, “insurance is a waste of money… until you need it”.

Affordability the main reason

According to the research, Aussie drivers aren’t protecting their cars with comprehensive policies due to higher costs, affordability and not thinking their car is worth it. But experts warn that ditching, rather than switching, might cost them more later on.

Source: Compare the Market

Instead of cutting insurance cover altogether look for ways to cut premiums down. If people are looking to save a few bucks by giving up their comprehensive car insurance, they are compensating short-term gain for long-term pain.

Obviously no one wakes up and thinks about wanting to be in a car crash, but sometimes the improbable does happen. If you were found to be at fault without insurance, you could be hundreds, thousands or even tens of thousands of dollars out of pocket in repair or replacement costs.

If rising costs are the concern, there are a few ways people may be able to reduce their premium, including increasing their excess, paying premiums annually and even re-evaluating how many kilometres they drive on the car and opting for a pay-as-you-drive policy.

Younger generations opting out at higher rate

The data also showed that younger generations were opting out of comprehensive insurance at higher rates than older generations. Almost one in three Gen Zers and one in five Millennials have opted out of comprehensive insurance in the past 12 months.

Source: Compare the Market

The prevalence of cutting comprehensive car insurance could also be leaving drivers unprotected against car break-ins and personal property theft, as the research also found that as many as 52.5 per cent per cent of people do not park their cars in a locked garage at night.

Source: Compare the Market

Not just accident protection

Comprehensive car insurance not only protects you financially if you were to find yourself in an accident on the road, but may also cover towing costs, theft of personal items, as well as any damage caused by fire, hail, storms, floods and other weather-related damages.

As many as one in ten drivers say that their car has been broken into. So it’s worrying to see so many people relying on a prayer and hail Mary to spare their savings if their car were to get broken into, or if they were in an accident and were found to be at fault.

Given that less than half of people are parking inside a locked garage, there are a number of weather factors that could leave them with extensive damage to their car that could be costly to fix.

If you’re looking to reduce car premiums, the best place to start is to compare different options. There may be policies with other insurers that may offer the same level of cover at a lower price.

Simple ways to lower your car insurance premiums

1. Increase the excess on your policy

By increasing the amount of out-of-pocket costs you’re willing to absorb if you were to make a claim you could get your insurance premium at a cheaper rate.

2. Pay annually over monthly or fortnightly

While it may be convenient to pay your insurance premium weekly and only see small amounts come out of your bank account, you could save a lot by paying your yearly premium upfront. This doesn’t mean you’re locked in; you can still cancel your policy at any time if you want to switch, and you’ll be able to get your premium back at a pro-rata rate.

3. Drive less, pay less

If you are using your car less, and perhaps catching public transport or carpooling more, consider switching to a low kilometre or pay-as-you-drive policy.

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