Australian drivers could be spending hundreds more on car insurance than they need to, according to new research by Compare the Market, in what experts have labelled a ‘convenience catch’.
Insurance quotes for a hypothetical Ford Ranger ute owner could reduce around $184 (10.21 per cent) on average, by simply commencing their cover in three weeks’ time compared to the same day.
Even purchasing a policy to start on the next day resulted in a $78 (4.33 per cent) reduction in quoted premiums on average, while commencing one week later saw an average quoted premium reduction of $130 (7.19 per cent) compared to starting the same day.
As for a Tesla Model Y driver, starting a new car insurance policy three weeks later could shave a sizeable $336 (9.73 per cent) off on the average quoted premium – helping offset the generally higher cost to insure an electric vehicle.
Similarly, an example Toyota Corolla Hybrid owner could claw back $75.83 (4.49 per cent) by planning ahead and commencing three weeks later from the quoting day.
Beware of the trap
The research is a wake-up call for Australian motorists who don’t plan ahead and purchase car insurance to start immediately; they are then often slugged with higher premiums.
This is because of ‘loadings’ put in place by some insurers to compensate for higher claims volumes.
For example, new car owners could be initially unfamiliar with driving their new vehicle and insurers may take this into account when pricing for a policy to commence immediately. Additionally, insurers may consider there is a greater chance that a vehicle is already damaged, if the policy is commencing immediately.
It pays to prepare but unfortunately lots of people are caught by these pricing policies unawares. Never wait until the last minute. The expert team at Compare the Market found substantial reductions in the tens – and in some cases, hundreds of dollars – on average by simply commencing a new car insurance policy the next day, a week or three weeks later.
This saving adds up to potentially cover – or at least offset – the cost of a full tank of fuel or battery recharge.
Shop around as soon as you are looking for a new or used vehicle to see whether you can afford the ownership costs, and once you know when you’re getting the keys, it pays to purchase in advance.
But don’t just pick the first insurer that appeals to you with their branding. Compare your options, consider whether a higher excess is appropriate for you, and if your circumstances permit, consider setting driver minimum age limits if the option is available.
These are all levers to ensure the power is in consumers’ hands, not the insurers’.
