Premiums and claims

Two moments define your relationship with an insurer: the day they price you, and the day you claim. This lesson looks closely at both, because each one rewards people who know how the game works.

Why young drivers pay so much

An 18 year old and a 45 year old insuring the same car can be quoted premiums hundreds of dollars apart, and it is not personal. Insurers price on statistics, and the statistics are blunt: young and newly licensed drivers crash more often than experienced ones, so the pool charges them more to join. Nothing fixes this except time and a clean record. Every claim free year makes you cheaper to insure.

The mechanism behind that last sentence has a name: the no claim bonus, sometimes called a rating. Each year you drive without an at fault claim, your insurer moves you down a discount ladder, and after several clean years the discount can be large. The reason is the same statistics again. A driver who has gone five years without a fault has shown the pool they are lower risk than the average newcomer, so the pool asks them for less. The catch is that a single at fault claim can knock you back up several rungs at once, which is part of the real cost of a claim and a reason small prangs are sometimes cheaper to pay for yourself than to claim.

The dials that move your premium

• Your excess: higher excess, lower premium.
• Where the car sleeps: a locked garage beats the street.
• How much you drive: some policies charge less for low kilometres.
• The car itself: powerful and expensive to repair means expensive to insure.
• Your history: past claims and driving offences raise the price, claim free years lower it.

Because insurers weigh these differently, quotes for identical cover genuinely vary. Comparing two or three insurers before buying, and again before every renewal, is some of the best paid work per minute you will ever do. Loyalty is rarely rewarded in this industry.

Here is where the no claim bonus turns into an actual sum, illustrative but realistic. Say you scrape a pole and the repair to your own car is $900, your excess is $800, and claiming would strip a discount worth $400 off next year's premium. Claim, and the insurer effectively hands you the $100 above your excess while your renewal jumps by $400, so the claim leaves you worse off. Pay the $900 yourself and your record stays clean. Whenever a repair is close to your excess, do this small piece of arithmetic first, because a claim is not free even when it is approved.

When it goes wrong: the claim

At the scene of any car accident, the job is the same: make sure everyone is safe, then exchange names, phone numbers, licence details and registration numbers, and photograph everything, both cars, the street, the damage. Then call your insurer, ideally the same day. From there the insurer assesses whether the event is covered, gets quotes or sends an assessor, and either repairs, replaces or pays out, minus your excess.

One more thing decides claims before they even start: what you told the insurer when you bought the policy. Where the car is kept, who drives it, your claims history. Getting these wrong to save on premium is the classic false economy, because a discovered lie can void the policy exactly when you need it.