If you’re under the age of 25 buying a car can be tough, but shopping around for car insurance is often an even bigger challenge.
Aside from the usual insurance costs, you’ll most likely cop a hefty ‘under 25’ or ‘young driver’ penalty. This is because statistically, like it or not, your age group is more risky to insure.
Not to worry though, we’ve done the hard yards to help you make the right decision and save money.
Do I have to get Comprehensive insurance? Surely there is a cheaper option.
It can be tempting to just settle for the Compulsory Third Party (CTP) insurance as required by law, but often this is expensive on its own, and adding the cost of other non-compulsory policies may not be appealing.
However, it’s important to know that CTP generally only covers third-party injury, not damage to property or vehicles you may be responsible for.
For newer or more valuable vehicles, Comprehensive insurance can make more sense given the greater risk of financial loss involved.
Non-compulsory options such as Third Party Property insurance as well as theft and fire cover can be cheaper than a Comprehensive policy and may be worth having if you are driving a relatively cheap second-hand car.
Some insurers call this an ‘intermediate’ plan, so make sure you know what it covers. For example many intermediate plans cover theft, but not vandalism.
For newer or more valuable vehicles, Comprehensive insurance can make more sense given the greater risk of financial loss involved. It’s up to you to weigh up the risk versus cost of insurance for the value of your car.
It is also important to note that Comprehensive insurance is generally a condition of a car finance plan.
Should I just latch on to my parents’ plan?
Another option is to be simply listed as a driver on your parents’ or other willing car owner’s existing plan.
This is only possible for vehicles owned by the policy holder, so not ideal if you’re seeking insurance for a car you legally own.
It can be a good option to mitigate the cost of premiums but make sure you’re aware of the policy’s fine print. It’s important to understand exactly what it covers as well as the excess cost involved if you need to make a claim.
This can amount to several thousand dollars on top of the regular claim excess, resulting in a significant cost that could outweigh the cost of having your own policy in the first place.
How can I reduce my premium?
There are many ways to reduce the cost of your premium, which could possibly negate the under 25 penalty.
The first and possibly most important step is to choose a car that is in a ‘low-risk’ category.
Performance-orientated or premium branded cars are likely to carry a larger premium, and there is also the possibility of being refused a policy altogether due to the insurer’s calculated risk outweighing their need to break even on a claim.
You could also take measures to have your car fitted with extra security features such as a kill switch or an alarm.
Enrolling in a safe driving course can also save you big dollars, and some insurers offer them for free.
There are also several regular discounts you may qualify for.
For example, a securely garaged or seldom driven car (sometimes up to 20,000km/annum!) can be seen as a lesser risk and earn discounts of several hundred dollars.
Most insurers will also give you a discount for paying your premium as a lump sum each year rather than in instalments.
You can also be rewarded for avoiding claims in the first place with a No Claim Bonus.
A no claim bonus is a reward for remaining claim (and often demerit point) free and becomes an increasingly large deduction from your premium.
This can be one of the largest discount factors on your policy, so make the most of it.
What else should I know about my plan?
Securing a cheap premium shouldn’t be the only factor in your decision.
Make sure you read and understand the Product Disclosure Statement (PDS). These documents contain the full terms of the policy.
If you buy a car with aftermarket parts or plan to fit aftermarket parts, be sure to tell your insurer.
If you are insuring a late model or a new car, make sure that the insurer pledges to use genuine replacement parts.
Some insurers use cheap aftermarket copies to cut costs which can be of lesser quality, less-safe, and could affect the resale value of your car.
Also keep an eye out for extra coverage, like excess-free windscreen replacement, roadside assist and hire car cover. These are often excluded, even from comprehensive policies.
Finally, if you buy a car with aftermarket parts or plan to fit aftermarket parts, be sure to tell your insurer.
If you have an accident with an undeclared wheel upgrade, engine modifications or bodykit this can be enough for the insurer to void your cover entirely and leave you well out of pocket.
Car insurance – basic terms explained
Premium – The amount you pay periodically to insure your vehicle.
Excess – A set financial contribution you must pay in the event of a claim.
PDS – Product Disclosure Statement (The full details of a policy).
CTP – Compulsory Third Party insurance (this required by law).
PED Guide – Premiums, Excess, Discounts & Claims – Some insurers separate this document out from the PDS. It contains the full pricing and payout details of a policy.
Total Loss – Commonly referred to as a ‘write-off’, this is when the damages to your vehicle are higher than the agreed value. You should always check exactly what your policy covers in this scenario.
Cooling-off period – You have 21 days from the time you purchase the policy (not the time the policy starts) to cancel your policy at no cost.
Have you had an experience dealing with insurance as an under 25? Tell us your experience in the comments below.