How Paying Your Monthly Car Insurance Could Cost You Twice As Much

“This is a good reminder to take the time to read the fine print carefully. The terms of the policy are communicated here. Unfortunately, many policyholders don’t do this, which is why it’s so shocking.”

The information is buried deep in the fine print of the NRMA Product Disclosure Statement on page 28 of 29. Few of us ever get that far (in fact, we don’t make it to the first page).

But the pay-as-you-go clause is actually an additional application of what most insurers do if you pay annually in advance: the right to reimbursement if the policy is canceled is usually based on the fact that you made no claim at all and almost no claim. of course, without declaring a complete loss.

Only then will you usually receive a prorated refund if you later decide to leave. Likewise, if you pay monthly and your car (or another) is destroyed, you lose your insurance premiums for the entire year, even if you haven’t paid them yet.

Of course, exactly what you’re entitled to in terms of canceling your annual policy is likely to differ from insurer to insurer, and you’ll also need to consider any cancellation fees.

Indeed, each policy level within each category of insurance (comprehensive or compulsory third party insurance), within each insurance brand, will have its own terms and conditions. In a statement, IAG, Australia and New Zealand’s largest general insurer, together with NRMA, Budget Rollin and CGU Motor Insurance, said:

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“When the vehicle is a total loss and the policyholder receives the full benefit of the policy, either by receiving a new vehicle or receiving cash compensation for its value, the policy lapses.

“Since the policyholder has received the full benefit of the policy, any outstanding premiums must be paid by the policyholder. After receiving the full benefit of this policy, if the policyholder buys a new car, he will also need to purchase a new policy.”

I also note that although Jacinta’s policy only included two weeks’ car rental, the NRMA extended this to one month in recognition of her long three-month wait.

However, back to your own policy: don’t lose sight of the fact that when paying monthly, most insurers also add a load, around 30 of them.

Of these, Finder’s research shows that there is about a 15 percent increase year over year. Typically this difference is around $200, but for a more expensive premium it can increase to $650.

And yes, any at-fault claim makes insurance premiums more expensive, adding anywhere from 11 to 28 percent, depending on the insurer. The average among the providers Finder looked at was about 20 percent.

Bottom line: If you write off your own or someone else’s car at fault, you could be faced with a surprise bill of up to a year’s premiums. And your premiums from your next policy anniversary or next claim are likely to be significantly higher.

Nicole Pedersen-McKinnon – author How to get a mortgage without a mortgage like meavailable at www.nicolessmartmoney.com. Follow Nicole on Facebook, X and Instagram.

• This advice is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek professional advice tailored to their personal circumstances before making any financial decisions.

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