5 Car insurance myths busted

The car insurance renewal reminder is one of those dreaded items that pops up in the post or email inbox every year leaving you to decide whether to look for a better deal or to stick with what you’ve got.

For many of us, time becomes the enemy and, before we know it, the bill is due, it gets paid, and we continue with the same provider. Considering the importance of car insurance, you probably should make the extra effort to find the time to look over what yours actually covers.

For those looking to purchase their first vehicle, or those that have never read their insurance product disclosure statement, here are some car insurance myths that are worth quashing.

First, let’s wipe the floor of some bizarre ones. You will not pay a higher car insurance premium solely based on your car being red, on your being male or because of your star sign. If your premium is high it has to do with the type of car you drive, where you live, your driving experience, your claim and criminal history, vehicle modifications and how the vehicle is being used.

It’s well worth getting an insurance quote before purchasing a vehicle so you can see what you will be paying in premiums. Certain vehicles can be at higher risk of theft, vandalism, or may just draw more claims than others. All these things can determine how much insurance premiums will be. It's not always about who’s driving.

1. Not-at-fault claim means you don’t pay an excess
Even if you are ‘not at fault’ in an accident, you may be asked to pay the excess before the claim can proceed. In some cases, the insurance company may waive the excess but if you read the product disclosure statement you will find there are certain conditions to the ‘not at fault’ clause. Unless you can prove definitively that you didn’t contribute to the accident, then you will likely need to pay up and dispute it later. Also, if you are found to be ‘not at fault’, the insurance company may not refund the excess until they have been paid from the other party’s insurance.

Don’t be afraid to keep following up with your insurance company regularly, ask them how the matter is progressing and find out when you will be refunded your excess.

2. Young drivers should be included in the parents’ insurance

If your teenagers are going to be driving your vehicle then they need to be added to your insurance policy. This may increase your premiums and excess due to the extra risk of including a driver under the age of 21. However, if you don’t include them on the policy and they are subsequently involved in an accident, the insurance company may refuse a claim.

Note: Mum and dad cannot insure a vehicle if they are not the main driver and the car is registered in their child's name. If you do this, don’t expect claims to be processed. Parents may think they are helping their children by putting them on their own policy, but it may be better for the teenager to obtain their own insurance so they can build up their own no-claim bonus sooner.

If a teenager participates in driver safety courses, owns an unmodified vehicle and doesn’t obtain speeding fines, this works in their favour to reduce premiums.

3. Insurance will cover all items on or in the car

This is not always the case so read the policy fine print. Some policies will cover items that were in or on the vehicle. However, there is usually an upper limit on the value covered. If the vehicle carries expensive equipment, or you have additional accessories fitted to the vehicle, you will require extra cover on the policy for these items. This will add to the premium costs.

4. My insurance covers business trips

If you use your vehicle for mostly business purposes, you should have commercial car insurance. If you use your car for both private and commercial use, you can ask the insurance provider to offer a policy to cover both. Some policies will include extra coverage for work tools stored in the vehicle.

If you take out private insurance and don’t advise the insurance company that you do business trips, they may deny a claim. In the event your vehicle is full of work items and you have an accident, this may be viewed as using your vehicle for work purposes.

If you are using a vehicle for something other than that which you advised the insurance company, this won’t be viewed favourably. Best to let them know everything and pay a little more on premiums.

5. Insurer loyalty means you pay less on premiums

Does your car insurance premium go down each year? That would be nice but it's not usually the case. You may be informed that a loyalty discount has been applied but you could still find that if you shopped around, a better deal might be found elsewhere, as the insurance companies compete for your business.

Premium prices are not everything. More important is to make sure you get the right policy for your needs. If it costs a little more to cover your requirements, then so be it. There is no point paying for a policy that is not going to cover you when you need it. Be open and disclose everything.

Most of all, read the product disclosure statement and your policy in its entirety. It’s best to know what you can and can’t claim before something happens. You may also be surprised by what you are entitled to as part of a policy. Some car insurance companies have some enticing perks to get you across the line.

Have you considered investing in a dash cam? Here’s an interesting article on everything you auto know about dash cams. Dash cams have been known to support “not at fault” car insurance claims.

Thumbnail image: Discovery Channel