The cost of car insurance

When deciding on insurance, two questions are of most importance: what type, and how much does it cost. The type you choose depends on your own requirements and needs, but the cost is contingent on a few components: your cars condition and cost, your personal history, and the type of vehicle you have chosen.

Vehicle’s Worth

The worth of the vehicle to an insurer is determined by the condition of the car and the type of valuing system you choose. The condition of the car includes factors such as the model, make, mileage, age and accessories. Other considerations include the use to which you are putting the vehicle (private or business), period of insurance and financial liability. The two types of vehicle valuing systems (the policy for pay out if the car is written off or stolen) are ‘agreed’ or ‘market’. Market is determined by the mileage, condition and the current market rate of the vehicle. This is the equivalent of the car insurance stock market - if the demand is booming you could find yourself financially rewarded for any crashes you may have, but if the market fails the bottom could fall out of your insurance cover. Agreed valuing, on the other hand, is the insurance savings account. You most likely will pay higher premiums, but regardless of the model’s current sales, the pay-out rate remains constant.

Claims History

A major determinant of premium costs for a particular car is the vehicle’s claims history. This is the risk attributed to each car model. Insurers measure this based on the type of owners the car usually attracts (are they careful old grandmas, or joy riding hoons?), the average cost of repair parts and the risk of theft. Higher risks are generally ascribed to modified or race cars, and scare some insurers so much that they refuse to insure them at all, or only with complex immobiliser and alarm systems attached. As a result of this, it is smart to check out the claims history before purchasing the vehicle. NRMA provide a standard rating system based on scores out of 100, accessible through their telephone advice services.

Personal Information

A very important consideration for insurers when offering you a premium is your own personal history and situation. This includes age, gender and claims history. Those of a younger age, particularly under-25 are considered high risk so premiums are offered accordingly. Gender is also a factor, with men, particularly younger guys, believed to be more dangerous and careless.
In relation to receiving your no claim bonus your own claims history is very important. This is given out to safe drivers (i.e. those that don’t cost the insurance company) and basically equates to a 20% discount with the Rating 5 for one year of no claims and 60% after 5 years along with the much desired Rating 1. These ratings can generally be protected (though sometimes for an additional fee) from one annual at-fault claim. But any further claims and your ratings (along with associated discounts) will be liable to fall.

Finding the best Insurance for you

Insurance policies vary substantially between companies, so shop around and make sure you find one suitable for you. The first thing to remember is that cheap does not always equal good. So ensure that you’ve read all the fine print and know exactly what you will be covered for. The basic cover provided by most insurance companies includes theft, windscreen/window damage, and harm due to violent weather, malicious assault or from an accident. Beyond this it can differ widely, so make sure you are clear on the exact circumstances in which help is provided. Most policies offer towing in urban areas, but when crashed or broken down in rural locations you may find yourself faced with a larger bill you have to personally take care of. As well as this, it is important to consider whether in this situation, rental cars and temporary accommodation will be provided for (with some policies offering to cover costs up to $1000). In the case of theft, policies vary in relation to insuring the personal items left within the vehicle. And similarly, in respects to car crashes it’s advisable to find out beforehand how much the insurers will protect you for. Some will replace old cars with new models, others are less flexible. This inflexibility also relates to repair of damaged cars; the majority of insurance companies have their own preferred mechanics, and may be strict or unyielding by refusing to allow you to elect your own. The other thing to inquire about is second party cover (whether you will be covered if someone else is driving).

Remember, the most important thing when considering insurance options is finding the one best suited to you. So consider your personal requirements and ensure you find the cover that conforms to these demands.