Car cover - shop around for the best deal
IF YOUR car insurance is due for renewal any time soon, make sure you're sitting down when you open the renewal notice. Premiums on motor vehicle insurance have risen dramatically in the last year, far outpacing inflation and skyrocketing by up to 11.75% in some states.
A recent report on comprehensive car cover by research group Canstar shows that in NSW, the most expensive state to insure a car, the average premium is now a whopping $1,464. By comparison, in Tasmania, which has the lowest premiums, the average cost is $813.
Rather than just wearing a price hike, it's worth taking advantage of the swag of new providers that have come into the market to see if you could get a better deal.
The insurance market in Australia is dominated by a handful of big names like Suncorp, IAG, QBE and Allianz. However over the last couple of years motorists have been able to choose from brands like Bingle, Budget Direct, Coles, Real, Virgin or Youi.
Competition is always good for lowering premiums, and it's particularly welcome news for motorists because some types of car insurance are unavoidable.
Compulsory third party (CTP or 'green slip') insurance is required before you can register your car though it only covers the cost of personal injuries caused to someone else if you're at fault in an accident. It does not offer protection for the cost of damage to property (your own or anyone else's).
Third party property insurance goes a step further, protecting you against damage that your car causes to other people's property. So if you run up the back of a Bentley or tear through the neighbour's brand new fence, you won't have to think about second mortgaging your home.
For complete cover including protection against theft, you'll need to take out comprehensive insurance. I reckon it makes a lot of sense to have this type of cover in place especially if a car is essential to your work or lifestyle. If your car is financed by a loan, the lender will demand that you have comprehensive cover in place.
Comprehensive car cover is offered by a far wider number of insurers than CTP. This gives motorists a better chance of saving on premiums by comparing between different insurance companies.
Paying premiums by the month can also make the cost more manageable and some insurers like Real and Nab, let you pay monthly at no extra cost.
Premiums are just one aspect to consider when you're organising car insurance. The last thing you need is to insure your vehicle at a cost of several hundred dollars only to find the insurer drags the chain at claim time or tries to 'fine print' you. Talk to friends, family and work mates about their experiences with different insurers to get a feel for which insurers are better at paying up - and note that there can be real problems in this area. I recommend you do some research online to review the insurers you're thinking about. Cheapest in this area is not necessarily the best.
Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine. Visit www.paulsmoney.com.au for more information.