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Statutory Write-Offs

There are two types of write-off in the car insurance industry: statutory write-offs and repairable write-offs. Statutory write-offs are cars so badly damaged that there is no hope of repairing them.  Statutory write-offs since 1st May 2002 may not legally be re-registered, and the Vehicle Identification Number (VIN) can never be used again on another vehicle. These vehicles are often sold at state auctions for scrap and parts. Drivers with car insurance may receive a payment from their insurer up to the value of the vehicle.

What Defines a Statutory Write-Off?

Every state’s traffic authority decides its own criteria, which typically include significant structural damage, mechanical, suspension or engine damage.  Your insurer will typically rely on evidence from professionals or from photographs to determine whether the damage to your vehicle meets these criteria. If the car can’t be driven again, it will be written off and listed on the written-off vehicle register (WOVR) to help prevent criminals re-using the vehicle’s identity on another car.

Repairable Write-Offs

The second type of write-off is a repairable write-off. This means a vehicle that is damaged enough that towing and repairing it would cost more than the vehicle is worth.  If you have car insurance cover for your vehicle then your insurer will make a payment of either the car’s market value or agreed value, according to your policy’s terms.

The process of claiming for a repairable write-off is the same as that for a statutory write off, but your car’s repairable status will be noted on the WOVR. That means that your vehicle will be de-registered, and if the car is repaired it will need to be inspected before it can be re-registered.

It is rare for your insurer to help you to pay for repairs on a repairable write-off, due to the economics of the situation.

How much can I expect to receive?

You may be paid either the agreed value or market value of your vehicle, depending on your policy with your insurer. An agreed value is an amount stipulated in your policy’s terms and conditions clearly stating how much you will be paid if your car is written off. Both you and your insurer will have agreed to this value, so it would be difficult to argue later that it is unfair or too low.

The market value is how much you might reasonably expect to get for your vehicle if it was sold in Australia today. Because of depreciation, wear and tear, and so on, you will almost always get less than what you paid for your car. The exact amount can be hard to predict, since prices fluctuate and no two buyers are the same.

Having your car written-off after an accident can be a costly experience but knowing what the options are can save you time and money.

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To help car insurance companies ascertain your potential cost to their business budgets, many use a driver safety rating. This rating categorises your estimated probability of being involved in a car accident or other incident that leads to you filing a claim with your car insurer. You are rated annually, and depending on whether your rating has gone up or down, or stayed the same, you may qualify for lower car insurance rates or be asked to pay increased rates.

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How the Driver Safety Rating  Works

Your insurance provider has a rating system to categorize drivers based on their driving records and claims history. That means that if you’ve made claims in the past, you may be put in a certain category, or given a certain rating, that will be one of the factors that affects your car insurance rates.

Driver safety ratings are expressed as a number. The more claims you’ve made or accidents in which you’ve been involved, the higher the number. This will tend to increase your car insurance premiums. For every year that you do not make any claims, your rating will go down one level until it reaches level 1. Compare car insurance companies to see how each one evaluates your driver safety rating, as each may have slightly different criteria.

How it Affects Your Car Insurance

There are many factors that go into how the company assesses your premium, such as your age, location and car model. Driver safety is another important factor. Insurance companies aim to keep their costs down, and they reward customers who don’t file claims, by offering them lower car insurance premiums. Good driving may equal lower costs to you. At the same time, car insurers will tend to raise the premiums of drivers who do file claims, because the insurer has to pay for the damage done, taking money out of their business.

If you are involved in an accident that was your fault, your driver safety rating will increase. If you are involved in an accident in which you are not at fault, the effect on your rating will depend on the at-fault party; if you have contact information for that party, and your insurance provider can claim the damages from him or his insurance provider, your rating will not increase. If you are not able to provide contact information for that party and your insurance provider will need to pay for the damages, regardless of the fact that you were not at fault, your rating may increase.

How to Get a Better Rating

Some providers may offer a driver safety rating protection program that keeps your score at 1 for the lifetime of your policy. You can then keep your rating of 1 for the full lifetime of your policy under this program. Do a thorough car insurance comparison to see what each insurer offers in terms of discounts or favourable premiums for low driver safety ratings.

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Underwriters assess prospective clients based on the possible risks they present. One factor that often signals a lessening of risks is when there are only one or two drivers who actually operate the vehicle. This is why insurers also ask you to list your name and the names of other people who will drive the car being insured. Those listed will be known as the nominated drivers, and this is a feature that directly affects your car insurance costs.

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Risks when someone else drives your car

Let’s say you’re on the road with a friend and because you’re feeling tired, you ask him to take over for a while. This is not a particularly unusual practice, but there could be consequences to your car insurance if something happens while your friend is driving. You have to keep in mind that insurers underwrite the vehicle and not the driver. In case you’re thinking that your friend has his own car insurance to fall back on, understand that in such a scenario only your own policy is usually relevant.

If an accident does occur while your friend was behind the wheel and you decide to make a claim afterwards, the claim may be rejected by your insurer or you may have to pay a higher excess or other fees. While it’s the car that gets insured, the coverage stated in the policy typically extends only to those listed as the nominated or preferred drivers.

Effect on car insurance excess

As you may know, an excess is a certain amount you agree to pay out of pocket if you make a car insurance claim. It is a part of the possible costs that you will shoulder, but it’s a fixed amount. The rule of thumb is that the higher the excess, the lower the premium tends to be. Besides the basic mechanism of the standard driver excess, there are other types of excess to consider.

The age excess for example may apply to drivers 24 years old and younger, or those aged 25 but with less than 2 years of driving experience. Here, the equation is the younger the driver, the higher the age excess.

Then there is the non-nominated driver excess, also sometimes called unnamed driver excess. This is the possible additional out of pocket expense that you’ll incur in a scenario such as the one described above. When you compare car insurance policies and go through the various product disclosure statements, make sure to look for and understand the provisions that relate to this feature.

Importance of full disclosure

There are several pieces of information you need to prepare and provide once you reach the point of purchasing a policy from a chosen insurer. These include details regarding the vehicle – its model, registration, safety features, etc.

Then there are the details about you, the primary driver/owner. This may include your driving records and your claims history. Insurers need to know how safe a driver you are, if you’ve had any traffic violations or were involved in any road accidents, to assess and determine what rates to charge you. This requirement goes for all the other individuals that may need to be included in the list of nominated drivers, too.

To add or not to add another driver?

This is a choice that senior members of a household that share a single car will typically have to make. Adding drivers to the nominated list may increase your car insurance rates, and this possibility may lead to some hesitation. But what you might save early on in car insurance premiums could be negated by future expenses.

Your insurer may reject a claim or charge you a high unnamed driver excess if there’s an accident while a non-nominated driver is in charge of your vehicle. Just as you can upgrade your coverage anytime, you can always communicate with your insurer to update the list of nominated drivers in your policy.

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Basic Car Insurance

This is where car insurance comes in.  Statistics show that transportation costs take up a large chunk of an average household’s income, and expenses resulting from car accidents have ballooned to cost billions per year.  Car accident costs include medical expenses, repair and property damage costs, lost time, legal expenditures and at the worst, loss of life.  This is why all car owners legally must have a minimum of Compulsory Third Party car insurance cover.

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Kinds of car insurance covers depend on the insurer.  However, these are the underlying cover levels, though they may be under different names or terms:

• Compulsory Third Party Cover: Covers only injuries or death to other people in an accident
• Third Party Property: Covers only damage to other people’s property
• Third Party Property, Fire, and Theft: Covers damage to other people’s property, as well as damage or loss caused by theft or fire to your car
• Comprehensive: Covers damage to your car and property, as well as the other covers above

What are Car Insurance Cover Extensions?

Car insurance cover extensions refer to items that are not in the standard car insurance coverage, but which you would still like to have covered.  Again, these extensions depend on the insurer and the policy you choose.  For example, there are some car insurance policies that may include acts of nature like floods or earthquakes as part of the basic coverage for damages, while others might treat it as part of their car insurance cover extensions.

Many car insurance cover extensions are things such as car repair insurance, which covers the normal wear and tear a vehicle acquires over time, driving a third-party car, which covers any liabilities or damages you incur or give while driving someone else’s car, additional medical insurance for you should you be  injured by another vehicle, and other such points of cover.

Car insurance cover extensions are meant to provide additional cover for you, your passengers and your vehicle above and beyond the standard insurance coverage described in the policy. Should you choose to avail of these, it is best to compare the car insurance cover extensions available to see if you do need them.

Keep in mind that taking car insurance cover extensions typically means paying a higher premium, which you may or may not be happy to do.  The best thing is to check out different car insurance policies so that you can see what is and what is not covered by their standard insurance terms and conditions, then ask your favourite few insurers for quotes that include any extensions you’ll want.

There are numerous websites that offer easy-to-use ways for you to compare car insurance cover extensions.  With a few clicks, you’ll be able to see a list of selected insurance policies and premium quotes. Don’t forget that if you add further car insurance extensions after obtaining your quote, the final premium you pay will be adjusted to include your cover extensions.

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You may be tempted to choose whichever value results in a lower car insurance premium in order to save money. However, keep in mind that should your car be a total loss due to an accident, theft or some other mishap, you may end up losing money, either because you paid more for your car than you will recoup from your insurer, or because it will cost more to replace your car than your insurer is willing to pay. Compare car insurance policies carefully to work out which type of vehicle valuation  is more likely to suit your needs.

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Agreed Value Car Insurance

When you insure your car for the agreed value, you and your insurance company agree on your car’s specific value when you take the policy out.  For used cars, this usually means that the value is taken from industry car value guides. It’s important to remember that the agreed value is determined at the time the policy is written; therefore, unless you change your policy yearly, or change insurers and therefore agree on another specific value, then this amount will go down as your car is depreciated in value over the years.

Market Value Car Insurance

Insuring your car for the market value means that you and your insurer agree that in the event that your car is a total loss, you will be reimbursed for the market value at that time. Therefore, if  your car depreciates in value or, in rare instances, appreciates in value, between the time that you take out the policy and a total loss event, you will be reimbursed for the latest market value of your car.

Making the Decision

Choosing between the agreed value and the current market value when purchasing car insurance depends greatly on your individual situation. If you’re insuring a new car, or a car with extensive modifications or added options, selecting an agreed value for your car may be a sensible option provided the value agreed is adequate.

Selecting an agreed value may also be an idea to consider if you are insuring a rare, very expensive, veteran, vintage or classic car. For instance, the market value of an average example of the same model as your classic car may be $30,000, for example. However, if your car is in extraordinarily good condition for its age, is a limited edition, or has other special features, these may raise its value above market value.

You may therefore decide to ask for an agreed value policy with a greater cover amount. Bear in mind that if the market value of your car increases, then you could lose money with an agreed value policy.

When it comes down to the wire, the biggest difference between choosing an agreed value policy and a market value policy is what you can expect to receive from your insurer should your car be a total loss.

With an agreed value policy, you’re guaranteed the agreed value, less anything deducted for depreciation if this is allowed for in your policy. With a market value policy, you’re only guaranteed your car’s market value at the time of the total loss event. This amount may not take into consideration any modifications or added options your own car has, and will tend to decrease over time.

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Myth 1: “The Policy With the Cheapest Premium is Always the Cheapest Policy”

When you opt for car insurance cover with a cut-price premium, the trade-off is often a higher excess and/or limited coverage. As long as you do not have an accident, your rock-bottom premium may be a good deal, but it may be wise to keep some money in the bank in the event of an accident, if your car insurance cover is limited.

If you do need to make a claim you may find that there are more expenses you have to meet yourself. You may not only pay a higher excess on repairs and parts, you may also be offered with a higher premium come policy renewal time — some insurers will increase your premium at renewal should you have filed a car insurance claim.

Myth 2: “Insuring a Teen Driver Is Near Impossible”

Teen drivers have a poor reputation with car insurers because they are higher-risk. The NSW Centre for Road Safety reports that a 17 year-old driver with a P1 licence is four times more likely to be involved in a fatal accident than a driver over 26.  This sobering statistic makes it obvious why insurance companies often charge higher premiums when there’s a teen driver listed on the policy.

Despite teen drivers’ reputation as a high claims risk, it is possible to insure a teen driver. One key to keeping your car insurance quotes low is finding the right car. Put your teen in an inexpensive car that features safety equipment such as immobilisers, alarms, micro dotting, and sat-nav tracking devices. Cars with performance enhancements, high horsepower engines, or turbochargers are more likely to be stolen and to be involved in high-speed collisions, which typically translates to higher premiums in your car insurance quotes comparison.

Myth 3: “If I Have a Traffic Violation or Get in an Accident, My Premiums Will Shoot Up”

If the only thing you fear more than flashing lights in your rear view mirror is the damage a traffic violation will do to your pocketbook when it comes time to pay your car insurance premium, take heart — one minor accident or traffic violation is unlikely to cause your premium to rise sharply. Have a few accidents, or rack up a number of violations, however, and you may face higher premiums or even an insurer declining to renew your car insurance policy.

Myth 4: “All Anybody Really Needs is Compulsory Third Party Car Insurance (Greenslip)”

Yes, you’re required by law to carry compulsory third party (CTP) or greenslip insurance, depending on your state of residence, but if you think that this insurance alone will always provide enough coverage, then you may want to look closer at your car insurance needs.

• CTP/greenslip policies only cover accidents where you are at fault, either as the driver or as the owner of the car, and will cover injuries and death for your passengers, anyone else involved in the accident (other drivers and passengers of other vehicles, or pedestrians). 
• CTP/greenslip policies will not cover your personal injuries, if you are at fault, and will not cover damage you might cause to your vehicle, or to other vehicles or property. In other words, if you’re carrying CTP/greenslip cover only, and are at fault in an accident that injures you and destroys another person’s property, you may have to pay for any costs incurred aside from injuries sustained by other people involved in the accident.

Did you know the truth about all 4 of these myths? What other misconceptions have you heard about car insurance and ways to compare car insurance quotes?

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What is a Car Warranty?

First of all, let’s get one thing clear: there is a vital difference between your car insurance and your car warranty.

Compulsory third party car insurance covers injuries to other people in an accident where you were the driver at fault. Greater levels of car insurance coverage are available for third party property, your own car, and certain other extra items.

Car warranties are an entirely different service and are not a form of insurance. Your warranty may cover the costs of some maintenance and repairs that can become necessary due to general wear and tear to your car.

Those who are unclear about their warranty’s terms and conditions may face disappointment if they’ve misunderstood what it covers.  It might be a good idea to take some time to test your knowledge of your car warranty.

Do You Know the Warranty Essentials?

Ask yourself the following basic questions:

• When does your warranty end?
• Is it purchased through your car dealership or a third party?
• Can you have repairs done anywhere, or are only certain specified service providers covered by the warranty?
• Are your tyres, brakes, and rotors covered by the warranty?
• Does it carry an excess or any other costs you’ll have to pay yourself?

Being familiar with your car warranty, whether it’s a new car warranty or an extended warranty, will be of great assistance in knowing how to arrange for repairs and plan your finances.

Put Your Knowledge to Use

Once you are familiar with your car warranty, you will be better able to put it to use if needed.  Imagine that you are on a road trip and need repairs.  What will you do?  You might take it to the closest dealer or mechanic – you’ll need to know what services and providers will be covered by your warranty.  Also, what if you need roadside assistance?  Will your warranty provide towing, a rental, or any other assistance to get you on your way?

Failing to understand the warranty correctly may end up costing you money. Repairs at unauthorised locations may be more expensive; you may miss out on a free rental car if you don’t even know whether it’s covered under your warranty.

Know Your Warranty Before Purchasing

This is the real point of this article.  It may benefit you to know the ins and outs of the warranty before you make a purchase, either of the warranty itself or of a new car.  To compare different extended warranties, just as you would when comparing car insurance, you will need to know what is covered, where you can take care of car repairs, and the cost of the warranty.

Take the time to learn more about your warranty; read it through and call the warranty provider if you need any clarification – ideally before you make the purchase.

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How Lapses in Car Insurance Coverage Happen

A lapse in coverage most commonly occurs in one of these ways:

You fail to pay your car insurance premium on time.

While it might not necessarily lead to your insurance policy being cancelled, missing payments is a common error that is easily avoided with a little forethought.  If you don’t pay on time, you aren’t abiding by the terms of your insurance agreement, and your insurer may take action if you keep falling behind with your premium.

If you have trouble remembering to pay, consider an automated payment method or perhaps try using some sort of appointment reminder to tell you when your car insurance premium must be paid. If you’re having financial problems and have no means to pay the premium right now, speak to your insurer as soon as possible to agree a reasonable plan for you to bring your premiums up to date.

You are switching car insurance companies

When you go to compare car insurance, it is only natural that if you find a better premium with another insurer you may be tempted to switch.  However, you must be careful in the timing: don’t let your current car insurance policy expire until your new insurance coverage is in place; you can call your previous insurer if you wish and inform them of the date you’ll be switching.

Penalties and Other Repercussions

Some rather unfortunate consequences may occur when you have a lapse in you car insurance coverage.

Your insurer may choose to take action, such as charging you a late payment fee or declining to renew your policy at the end of its term.  They may even decide to cancel your policy before the end of its term, if they feel that you are not holding up your end of the agreement.

There are also other potential negative consequences.  Unfortunately, your credit rating can be tarnished if you aren’t paying your premiums on time.  Your car insurance company will report payment defaults to the credit agencies, so missing payments may add up to a worse credit score.

Avoiding Lapses in Coverage

Be aware of the risks surrounding missed car insurance payments, and try to match the start date of a new policy to the end date of your previous policy to avoid gaps. Find a reliable way to remind yourself when your car insurance premium needs to be paid, and build car insurance into your budget to ensure you’re never short of money to meet your payment obligations.

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What Is Uninsured Third Party Cover?

You may not be aware of the dynamics surrounding this important part of your insurance policy.  However, what would you do if an uninsured vehicle collided with your car, causing damage to your beloved vehicle?

Around the world, there are cars on the road without insurance.  If your car is hit by an uninsured motorist, neither your Compulsory Third Party (CTP) insurance nor Third Party Property, Fire and Theft insurance will cover the damages to your own car. However, you can find insurers who provide Uninsured Third Party cover against the cost of damages to your vehicle caused by an uninsured driver.

How do I Get Uninsured Third Party Cover?

This is typically included as part of comprehensive car insurance policies, but if you only have Third Party Property or Third Party Property, Fire and Theft insurance then you should check your policy to find out if you already have protection against damages caused by uninsured drivers. If necessary, talk to your insurer, broker or agent regarding an Uninsured Driver extension to your Third Party Property Insurance.

Uninsured vs. Underinsured Motorist Protection

Contrary to popular belief, uninsured and underinsured motorist protection are not equal in terms of insurance – your insurer will typically treat these two scenarios differently.

If your car is damaged by a driver who simply doesn’t have enough insurance to cover the damage to your car, you could be out of luck. Keep this in mind, and check your policy for mentions of underinsured drivers as well as the uninsured.

References:

http://www.shannons.com.au/pages/policy-wording/motor-policy/page-09.jsp

http://www.aami.com.au/car-insurance/third-party-property-car-insurance

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Research before you buy. There’s no guarantee that insurance companies will agree to insure a modified vehicle so you’re advised to check that you can get adequate coverage (including all of your modifications) before you make the purchase. If you jump straight in before you’ve got confirmation that your vehicle can definitely be insured, you may get a nasty surprise further down the line if you later find out that your modifications won’t be covered.

Tell your insurance provider. If you add modifications to your current vehicle without changing insurance providers, be sure to let your current provider know that this is the case. Because your ‘new’ vehicle won’t be the same one that you originally took out the policy for, there is a possibility that it may invalidate it.

Do you need specialist insurance? Some of the more general car insurance companies will cover all modifications as long as they’re legal and roadworthy, but depending on how unique your modifications are,  you may prefer to seek out a specialist insurer who deals exclusively with modified vehicles for added piece of mind and confidence. There’s no guarantee that going down this route will lower your premiums though as modified vehicles tend to come with higher than average premiums across the board due to the increased insurance risk, but it can be easier to deal with any claims you may need to make.

Don’t go overboard with the modifications. A modified car will land you higher premiums in general but further modifications will bump them up even more. Modifications that make your car perform better and go faster will increase your premiums as most insurance companies will be worried that you’re more likely to be involved in an accident and therefore need to make a claim, especially if you’re also a young driver aged under twenty-five. Male drivers in this age bracket are already deemed a big insurance risk and modifications that make you more likely to speed won’t do you any favours in that department.

Getting insurance for a modified car can become expensive, especially if you’re a young driver as most insurance companies will perceive you as a doubly high risk to insure. Some of the key ways to keep your insurance premiums down can include limiting the number of modifications that you choose to make and staying clear of ones that increase your car’s speed and performance levels so that you’re not deemed an even bigger risk to insure.

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