This insurance article was compiled with the assistance of, and sponsored by, AAMI

Car insurance can be a strange and mysterious world for those new to the marketplace. In fact, truth is many of us that have been paying insurance for years are just as much in the dark. So, to help you on your way, we’ve enlisted some expert help to compile our top ten Frequently Asked Questions about car insurance.


1. How do I know which type of insurance is right for me?

Ask yourself two questions: first, do you need third party or comprehensive car insurance; and second, which insurer and which policy will best serve your needs?

The first question comes down to risk versus reward and what fits your budget. The risk is the chance of you having a collision, plus your ability to cope if your car is off the road. The reward is how well you will be covered, financially and in terms of convenience.

Next comes the decision about which company and which deal works for you. It’s now time to list the factors that are most important to you, eg: a low excess; a hire car while yours is being repaired; accommodation if you’re far from home; windscreen coverage, flexible (months) payments, etc.

Make your choice based on these priorities and you’re most likely to end up with a policy that gives you what you need.


2. How can I get the cheapest policy?

The surest way to reduce your premiums is to be accident-free.

By way of example, as well as seeing your rating improve, AAMI’s Safe Driver Rewards Program offers up to a 15 per cent discount and other benefits the more years you drive without an ‘at-fault’ claim.

But what can you do to cut your insurance bill if you’re just starting out? Thankfully, some insurers recognise the value of driver education. Using AAMI as an example again, the insurer offers those under 24 years a 10 per cent discount on fully comprehensive car insurance when they successfully complete an accredited Skilled Drivers Course.

Other options may include flexible premiums, whereby you pay a lower premium in exchange for a higher excess (or vice-versa if you prefer). Other insurers offer coverage only if you drive a limited amount in any year.

Handy hints include restricting your policy to nominated drivers, especially if they are over 25 and have good clean records. Making sure your car is parked in a garage overnight, not on the street, may also qualify you for discounts.

And don’t forget multi-policy discounts. Combining car and house insurance, for example, with the one insurer can save you quite a bit.


3. How do insurance ratings work?

This is how the insurance industry literally rates drivers in terms of their likelihood to make a claim.

With each claim-free year, you rise up the ratings ladder and your premiums get cheaper. If you need to make a claim and you are at fault, your rating will drop and the price will go up again.

Your rating should not be affected if you are involved in a collision that is not your fault. Some insurers also offer inducements to keep your business, such as a rating one for life, which can certainly make a difference.


4. Should I choose an agreed value or market value policy?

Agreed value is the value of the insured vehicle as noted on the most recent policy schedule. The amount is usually determined based on the value nominated by valuation specialists such as Redbook. It is the most your insurer will pay out in the event of a write off.

An agreed value is set out at the commencement of the policy and is adjusted each period of cover.

Market value is the value of your car if you were to sell it on the general market.


5. Do I have to pay my whole premium in one go?

How and when you pay can make a difference to your hip pocket, so before you decide on a policy check the payment options.

Choosing a pay by the month option brings added convenience but usually costs more overall.


6. Will my policy cover me if my 17-year-old son crashes my car while he’s on L-plates?

Policies vary widely, but it’s safe to say that you should inquire with your insurer before you let your kids get behind the wheel -- just to avoid any nasty (and potentially expensive) surprises.

Bear in mind that if you drive a specialised vehicle there’s less chance that your policy will cover learners. Unless, of course, you have specifically nominated your childrens as potential drivers, in which case you’re probably already paying extra.

Also remember that in most cases learners are not allowed to drive high-powered vehicles. So rule number one is to check with your insurance company.

Rule number two is to teach little Johnny (or Jeanette) to drive in the Corolla, not the Corvette.


7. What happens if I’m over 0.05 and I have an accident?

In this situation insurance might be the least of your worries, but it is certainly an extra problem you’ll have to face.

It is safest to assume that if you are breaking the law when you crash then all bets are off and your cover will not apply. One more reason not to drink and drive!


8. I forgot to pay my insurance renewal and I had an accident. Am I covered?

You may find that your insurance company provides a grace period during which you will still be covered, but it is not a risk worth taking.

Your policy will most likely state that once you pass a certain date your coverage lapses, so you will have to hope you can convince the insurer that it was an honest mistake and that you had every intention of paying on time.

This is where a solid insurance history with the same company can be a real benefit. Those years of coverage can be your best friend if things go wrong.


9. My friend and I drive the same kind of car but he/she pays less for insurance. Why is that?

Insurance premiums differ for a range of reasons, for example: driving history (experience, traffic offences, accidents and claims), where the vehicle is kept overnight, multi-policy discounts. Different insurers hold different views about these factors.

It is not wise to assume that you will pay the same as someone else the same age, or even in the same street, as there are so many variables to be taken into account.

The message from all of this is that insurance can be a complex business and the best way to make it as painless as possible is to ask lots of questions and make sure you know what you are paying for before you need to use it.


10. My car was stolen with my computer/smartphone/tools/family photos in it. Will they be replaced?

Good luck getting your happy snaps replaced by anyone, but as far as other personal items or work gear is concerned, it’s best to check first rather than risk disappointment.

AAMI's Reuben Aitchison warns: “Contents that are generally covered up to a certain amount in the event of accident or theft are things such as luggage and clothing.

"What some people don’t realise is that things like mobile phones, cash, laptops and other ‘tools-of-trade’ are not necessarily covered. ”

So, if you frequently carry tools or expensive equipment of any kind in your vehicle it is in your interests to make sure you are covered, and to take extra precautions if you’re not.

And if the worst happens... How do I make a claim?
The first thing to do is to get the details of anyone else involved in the collision and inform your insurer of the incident as soon as possible.

This usually only takes a phone call, during which the company will ask for details of what has happened before sending you some more detailed paperwork or directing you to an online claims facility.

As far as organising repairs is concerned, thankfully the insurance industry has come a long way. If you choose the right insurer the whole process should be as painless as possible.

AAMI’s Reuben Aitchison says: “It’s enough to have had your car damaged without having to worry about arranging its repair. At AAMI we do all that for you. You can sit back and relax while we put our repair expertise – gained over a lifetime of arranging the proper repair of hundreds of thousands of cars – to work for you."

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