If your car has ever been lost or damaged through an accident, theft or extreme weather event, you might know the stress that can cause. Car insurance is there to help protect you against insurable events, big or small, which can happen even if you’ve made every effort to look after your vehicle.
However, another form of stress can come from having a car insurance premium that doesn’t fit your budget. A survey released by comparison website Finder in March 2023 found that, of 933 Australian car owners surveyed, 9% listed car insurance as one of the top three bills causing them the most stress.1
According to Finder, 46% of respondents listed the cost of car insurance as the most important factor when choosing a policy.1 However, comprehensiveness (32%) was another priority.1 So, is it possible to balance your budget with cover that suits your needs? Here are some tips that could help you reduce your car insurance premium while still achieving that balance.
What is a car insurance premium?
In insurance terms, a premium is the agreed amount you pay your insurer to keep your policy active. And just as there are different types of car insurance, and different versions of each policy type, not all car insurance premiums are the same.
Factors such as where you live, the type of car you drive and the level of cover you require will all influence the average cost. Research released by consumer advocacy group CHOICE in 2022 found the difference between the cheapest and most expensive car insurance premium in New South Wales, for example, was $1,090.2
“There are different levels of car insurance. As you would expect, the cost of insurance increases as the level of coverage increases,” says Youi Head of Product – Vehicle, Marni Jackson.
“Insurance premiums will differ between insurance companies, depending on their assessment of the overall risk, and what’s included in the cover. No two policies are the same.
“What that in mind, it’s important to go through the detail to understand what’s in and what’s out.”
In addition to doing some research on cover types and car insurance quotes, here are some other ways you could potentially reduce your premiums.
1. Car insurance premium vs car insurance excess
Car insurance excess is the amount you’ll be required to pay when you make a claim on your car insurance policy. When you’re choosing a policy, opting for a higher excess may reduce the upfront cost of your premium. On the flip side, if you choose a lower excess, there's a good chance your premium will be higher. So it's about working out what's right for your situation.
However, keep in mind there might be more than one type of excess you need to pay when you make a claim – for example, some insurers apply an additional ‘age excess’ to at-fault drivers under the age of 25.2 The product disclosure statement (PDS) for your policy can usually explain how and when excess payments apply, so it might be a good idea to familiarise yourself with those details.
2. Look for ways to help reduce costs for younger drivers
If there are young people in your household driving your car, this one’s for you. Drivers under the age of 25 are over-represented in road crashes,3 and can incur higher car insurance premiums as a result.4 Adding an under-25 driver to the policy of a parent or guardian will typically increase the cost of car insurance; conversely, removing a young driver from your policy could save you money.4
If a younger driver needs insurance for their own car, they will likely need some help navigating the process. Insurers such as Youi are always happy to provide more information when you contact them.
“Younger people are typically quite new to insurance so it’s good to take the time to understand what’s included in your cover, and what optional extras are available,” says Jackson. “We’re here to help, with advisors available to answer questions about your coverage and talk through your options.”
3. Be selective with extras and add-ons
Optional extras are car insurance features that you can choose to add on to a policy for additional cover – this additional cover can usually increase your premiums. Some features you might see offered as optional extras include:
- Your choice of repairer
- Hire car after an accident
- Reduced excess for windscreen repairs
- Cover for modifications to your car.
Minimising optional extras is one way to reduce your premium, but it’s also worth looking for a policy that automatically includes the extras you need. For instance, Youi includes roadside assistance as standard in its Comprehensive insurance policy.5
Everyone will have slightly different insurance needs, so if there are extras you do want, it could help to compare policies across different providers.
4. Agreed Value vs Market Value
How much do you want to insure your car for? With comprehensive car insurance, you can choose how your car will be valued in the event that your car is stolen or considered a total loss.6
- Agreed Value is a fixed amount that’s decided by you and your insurer.
- Market Value is the amount your car would have sold for at the time of the incident.6
Jackson says this choice can affect your car insurance premium.
“It’s a bit like choosing a fixed loan rate or a variable rate,” she says. “If you choose the highest Agreed Value you pay more, but you know exactly how much you will get.”
Understanding the different types of insurance
The level of cover you choose should be based on your unique circumstances, and the higher the level of cover, the more likely you are to pay more on your car insurance premium. Youi has a comprehensive guide to the different types of car insurance here, but below is a quick breakdown.
Compulsory Third Party (CTP)
CTP is mandatory for any car to be registered in Australia for use on public roads. It helps provide financial protection for drivers against injuries or death caused to a third party in the event of a car accident. Youi offers CTP insurance in New South Wales (where it’s called a Green Slip7) and South Australia.
Third Party Property Only
This type of Youi policy helps cover damage to other people’s property, including cars, caused by your car.8
Third Party Fire & Theft
Help protect your car from loss or damage caused by theft or fire with Youi’s Third Party Fire & Theft policy, which also helps protect you if your car causes damage to someone else’s property.9
Comprehensive
Youi’s top level of cover will help insure you for repairs to your car and other cars, even if the accident is your fault. It also helps cover your car for most severe weather events, fire, theft and damage to someone else’s property.10
While you may be able to reduce your car insurance premium by choosing a lower level of cover, it’s important to understand the trade-off. You may want to consider whether you can live without your car if it’s stolen or considered a total loss.
Calculating car insurance premiums
There’s a range of factors insurers can take into account when deciding how to set your car insurance premium. While not all of them are within your control to change, it’s worth talking to your insurer to see where you can potentially reduce what you’re paying. Here are some of the factors Youi considers when setting your premium:
- Your age and driving experience: Younger drivers may attract higher premiums as they have less driving experience.
- Your claims history: Your driving history plays a role in determining your premium. If you’ve made a number of insurance claims in the past, this can mean a higher cost for cover.
- The type of vehicle you drive: The age, make and model of your vehicle, as well as any security features or modifications, can impact your car insurance premium. You may want to explore Youi’s make and model pages for an indication of what you might pay to keep your car covered out on the road.
- Where you live and store your vehicle: Your premium might be higher if you live in a neighbourhood with high crime rates or where there’s an increased risk of extreme weather events. If your car is parked securely at night, you may pay a lower premium.
- Your driving habits: Typically, the more you use your car, and the more kilometres you drive, the higher the cost for cover is likely to be.
It’s important to always be truthful with your insurer so, with so many variables at play, it may be worth taking a fresh look at the way you use your car to see if there are ways you might be able to reduce your car insurance premium. If you’re looking to get a new policy or renew, Youi has a range of car insurance products to choose from.
Article by guest writer Annette Sampson
1 Source: Finder – Revved-up rates: More than half of Australian drivers facing car insurance hikes, 2023
2 Source: CHOICE – How to save money on car insurance, 2022
3 Source: UNSW – Young drivers needed to help reduce crashes, 2021
4 Source: Canstar – Comprehensive car insurance for under 25s
5 Youi Roadside Assist included with Comprehensive cover only. Exclusions, limits and additional fees may apply. Cover not available within first 24 hours of taking out, or upgrading to, Comprehensive cover. See T&Cs and Car PDS for full details.
6 Source: Moneysmart – Choosing car insurance
7 NSW Government – What is a Green Slip?
8 Available with Third Party Property Only, Third Party Fire & Theft and Comprehensive policies. See our Car PDS for full details
9 Available with Third Party Fire & Theft and Comprehensive policies. See our Car PDS for full details
10 Available with Comprehensive policies. See our Car PDS for full details
