Avoid this insurance 'trap' that's draining hundreds from your wallet annually!
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Navigating the world of car insurance can often feel like trying to find your way through a maze blindfolded. With so many options and hidden clauses, it's easy to fall into traps that can end up costing you dearly. But fear not, dear members of the Seniors Discount Club, because we're here to shine a light on a common pitfall and guide you towards keeping more of your hard-earned cash in your pocket.
The trap in question? Paying your car insurance in monthly installments rather than an annual lump sum. It's a mistake that can sneak up on you, quietly draining hundreds of dollars from your wallet each year. Queensland resident Mark Warnock, who juggles the costs of running two cars and two motorbikes, knows all too well the financial burden that can come with vehicle ownership. 'It's an expensive exercise,' he admits, citing servicing and fuel costs as major outlays. But it's the insurance that can really sting.
Many drivers might assume that the total cost of their car insurance would be the same whether they pay monthly, quarterly, or yearly. However, this assumption could be costing you more than you realize. Warnock discovered that paying annually could lead to significant savings. 'That's why I've looked at paying annually because there's a substantial reduction in what you end up paying,' he explained.
Data from Compare the Market supports Warnock's findings. In a comparison across three different car models, they found that five out of seven insurers charged customers who opted for monthly payments anywhere from 4% to a whopping 20% more than those who paid for the full year upfront. To put it into perspective, on a $1000 premium, a 20% surcharge equates to an extra $200 just for the convenience of monthly payments.
Chris Ford from Compare the Market points out that administration fees, driving history, and the risk of claiming are among the reasons insurance companies can justify these 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 advises. 'At least you have that confidence and it's not that stung stealth charge.'
If the idea of forking out a 12-month premium in one go is daunting, there are other ways to reduce your premium. One such method is to increase your policy excess, which can lower your monthly payments. However, it's important to remember that this means you'll pay more out of pocket if you need to make a claim.
Andrew Dadswell from the federal government's Moneysmart website also offers sage advice: 'Don't just renew blindly.' He suggests making sure your policy reflects your current situation. For instance, if your car spends most of its time parked in your garage, ensure that's covered in your policy. If you have children under 25 who no longer drive your car, remove them from the policy to save more.
Dadswell also emphasizes the importance of shopping around. Spending as little as 30 minutes comparing policies could save you hundreds of dollars over the course of a year. It could very well be the most lucrative half-hour you spend!
So, dear members, let's not let these insurance traps catch us unawares. By being savvy with our insurance payments and taking the time to review our policies, we can keep more of our money for the things that truly matter. Have you checked your car insurance policy lately? Share your experiences and tips in the comments below – your insights could help a fellow member save big!
The trap in question? Paying your car insurance in monthly installments rather than an annual lump sum. It's a mistake that can sneak up on you, quietly draining hundreds of dollars from your wallet each year. Queensland resident Mark Warnock, who juggles the costs of running two cars and two motorbikes, knows all too well the financial burden that can come with vehicle ownership. 'It's an expensive exercise,' he admits, citing servicing and fuel costs as major outlays. But it's the insurance that can really sting.
Some Australian drivers pay more for car insurance by choosing monthly payments over annual lump sums. Credit: Shutterstock
Many drivers might assume that the total cost of their car insurance would be the same whether they pay monthly, quarterly, or yearly. However, this assumption could be costing you more than you realize. Warnock discovered that paying annually could lead to significant savings. 'That's why I've looked at paying annually because there's a substantial reduction in what you end up paying,' he explained.
Data from Compare the Market supports Warnock's findings. In a comparison across three different car models, they found that five out of seven insurers charged customers who opted for monthly payments anywhere from 4% to a whopping 20% more than those who paid for the full year upfront. To put it into perspective, on a $1000 premium, a 20% surcharge equates to an extra $200 just for the convenience of monthly payments.
Chris Ford from Compare the Market points out that administration fees, driving history, and the risk of claiming are among the reasons insurance companies can justify these 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 advises. 'At least you have that confidence and it's not that stung stealth charge.'
If the idea of forking out a 12-month premium in one go is daunting, there are other ways to reduce your premium. One such method is to increase your policy excess, which can lower your monthly payments. However, it's important to remember that this means you'll pay more out of pocket if you need to make a claim.
Andrew Dadswell from the federal government's Moneysmart website also offers sage advice: 'Don't just renew blindly.' He suggests making sure your policy reflects your current situation. For instance, if your car spends most of its time parked in your garage, ensure that's covered in your policy. If you have children under 25 who no longer drive your car, remove them from the policy to save more.
Dadswell also emphasizes the importance of shopping around. Spending as little as 30 minutes comparing policies could save you hundreds of dollars over the course of a year. It could very well be the most lucrative half-hour you spend!
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