Applying for Car Insurance

Applying for car insurance and how are premiums calculated?

When you apply for car insurance it’s important to disclose anything that may affect your quote.

The best car insurance brokers are meticulous, because if they miss out a vital question it could go wrong for the policyholder. However, many consultants aren’t thorough enough with their questions and it’s often the insured that loses out. If a small detail is overlooked, it may invalidate your insurance, or your cheap car insurance may end up being more costly in the long run.

The most important factor in applying for car insurance is the often used catch-all in the small print, called your ‘duty of disclosure’, ie even if the insurer hasn’t asked you for the information, you still have to disclose anything that they consider will affect the premium or the terms and conditions.

Buying car insurance online is different; you are walked through the process, so you should be fine. However, be careful how questions are phrased to ensure that you are actually giving them an accurate answer. Also, if they ask you in the small print to declare anything else that may be relevant, you must do it.

As a general rule, if you’re not sure, tell the car insurance company everything, it’s not as hard as it sounds, most of it is common sense. Here are the five key things that you’re not always asked about that you should reveal when taking out a car insurance policy:

Insurance – Some factors to consider in deciding how much cover:

• Motoring convictions
  You can remove most motoring convictions from your driving licence before you are legally considered to be rehabilitated. However, you must tell your insurer about all driving convictions that you haven’t been rehabilitated for.
• Other criminal convictions
  You also need to tell your insurance provider about any criminal convictions you have, because this can affect your premium or terms of cover. If you fail to do so it may invalidate your car insurance policy.
• Motor incidents
  Most insurers want to know your complete incident history. This means they don’t just want to know about any claims you have personally made, or claims made against you, but against anyone else driving under your policy. Here’s a list of what they want to know:
  An ‘incident’ may be an accident, fire, theft, joy riding, vandalism or windscreen damage.
• Modifications
  Most insurers also need to know about every modification to your vehicle. Whilst it may not enhance its performance, it may increase its retail value or likelihood of being stolen. For example if, for example, you have had one of those noisy (but otherwise harmless) exhausts fitted, or even if you have just tinted your windows.
  Although this may seem odd, the main reason is that many insurers have found that people who own cars with modifications tend to cost more in insurance claims.
• Make and model
  When you get a car insurance quote, ensure that you have entered precisely the right make and model of your car. Selecting an L instead of an XL, or a three-door instead of a five-door could make a difference to the premium. If you pay too little, you may invalidate your car insurance.
  If you have any doubts as to whether or not to declare, give your insurer a call. If they’re fine with what you have to say, take a reference, or write down the person’s name, the name of the department they work in, and write down the date and time. Keep this information safe with your insurance documents in case you are later questioned about it.

Insurance policy excess

When you make a claim you have to pay the first part of it. This is called the policy excess. Typically you’ll pay $500 for damage, fire, theft with a higher excess for claims where the driver is below 25 or 21 years of age, although on some policies it can be a lot more. Beware, as quotes with a higher policy excess allows them to reduce the premium quoted. Make sure you are comparing apples with apples when looking for an alternative provider.

You can increase this excess to reduce the annual premium. If an insurer asks you if you want to add a voluntary excess to reduce your premium, remember that this will be in addition to the compulsory excess, which is likely to be $500 plus.

No Claims Discount (NCD)

No Claims Discounts are straight forward: you get a larger discount the longer you haven’t claimed on your car insurance policy, usually up to five years. If you have accrued a No Claims Discount and you make a claim, you’re bonus is usually stepped back in some way when you renew your insurance.

When you have built up a number of years No Claims Discount, you can sometimes protect your no claims bonus. It will cost you a bit more, but it means you’re allowed some ‘free’ claims before you lose any of your NCD, this varies from insurer.

Don’t protect your bonus unless you have to. Many people make the mistake of buying a protected bonus when they’ve already had too many claims in recent years. Therefore their next claim will reduce their bonus anyway. If you’ve had a claim or two, check the small print.

Don’t assume anyone can drive your car

Many people assume that if they have car insurance then other people are automatically covered to drive. This is not always the case. Some insurers exclude younger drivers or have larger excesses for younger drivers. Whilst this is one way of reducing your premium and is unlikely to affect you directly, letting your friends and family drive your car whilst uninsured is simply un-Australian. The only way to know is to check your insurance documents, which will state clearly what your excesses and exclusions are.

Whilst you’re at it, don’t make any other assumptions either!

Although the three main types of car insurance are generally defined in the same way, there are lots of terms and conditions that vary from insurer to insurer. For example, even if you have comprehensive car insurance cover, you may not be:

• Covered for windscreen damage.
• Entitled to a courtesy car

Or you may be:

• Limited to just one or two windscreen claims each year.
• Allowed a courtesy car for just a limited number of days per claim.

Understand the cover that’s included – a checklist

The policy might be cheaper, but that doesn’t mean it has everything you want. Use this list of questions to check you’re getting the right car insurance cover:

• Is the car insurance, CTP Greenslip, comprehensive, third party, fire and theft, or third-party only?
• What is the total policy excess in the event of claims? What about the excess for windscreen claims?
• Does the insurance policy cover all the drivers I asked for?
• Does the insurance policy include a courtesy car? (Note that not all comprehensive policies include these by default.)
• Do windscreen claims affect my NCD?
• Is the No Claims Discount protected?