Some Australians are getting caught out by a car insurance trap that costs drivers hundreds of dollars extra every year.
But one simple change could get you back in the driver’s seat of your finances.
Queensland resident Mark Warnock knows running two cars and two motorbikes can quickly clean out your cash.
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“It’s an expensive exercise,” he said.
“There’s servicing and the fuel side of it, it’s not cheap.”
The insurance he has to pay isn’t cheap either.
While you might expect it to cost the same regardless of whether you pay for your policy monthly, quarterly or yearly, Warnock has learnt this isn’t the case.
“That’s why I’ve looked at paying annually because there’s a substantial reduction in what you end up paying,” Warnock said.
Across three different car models, data from Compare the Market found five out of seven car insurers were charging customers who pay monthly from four per cent to a whopping 20 per cent more for their premium, compared to if they paid for 12 months up front.
“If you’re thinking it’s a $1000 premium, [at] 20 per cent, there’s $200 extra just to pay every month,” Compare the Market’s Chris Ford said.
Administration fees, your driving history, and the risk of claiming are among the reasons insurance companies can charge additional costs.
“When you are planning out the budget for next year, you would want to shift to that annual payment to avoid some of these fees,” Ford said.
“At least you have that confidence and it’s not that stung stealth charge.”
If paying a 12-month lump sum is not a viable option for you, increasing your policy excess can reduce your premium.
But beware, you will have to fork out more if you make a claim as a result, but it could be less money up front.
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“Don’t just renew blindly,” Andrew Dadswell from the federal government’s Moneysmart website said.
“If your car is parked in your garage, make sure that’s covered in your policy.
“If you’ve got kids under 25, and they no longer need the car remove them from the policy.
“Spending as little as 30 minutes shopping around could save you hundreds of dollars over the course over a year, it could be the most money you make over a short period of time.”
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