It’s fair to say the COVID-19 pandemic has changed much of the way we live our lives.
It’s certainly affected how we access work, community, healthcare and education. A ‘new normal’ is emerging, with part of that being many of us are driving noticeably less and all too many have been hit by reduced income (or worse).
If you’re not driving as much, you might be wondering if you should cancel or reduce your car insurance to save some pennies.
We recommend weighing up all the pros and cons first. As attractive as the short-term cost benefits might seem, reducing your insurance can have long-term ramifications for your household. After all, you want to be covered no matter the circumstances.
Cancel Your Car Insurance = Reduce Your Accident Cover
You will likely have heard about police issuing fines for travel that contravenes COVID-19 related public health orders. This has also helped to keep road accidents (and the subsequent drain on hospital resources) to a minimum.
This said, plenty of us are still driving a number of times a week. That’s why road accidents will continue to happen.
Yes, you might be a great driver, always alert and ultra-aware of road rules. Regardless, accidents are often due to factors beyond our control, such as the weather, animals on the road, and distracted or reckless drivers. It doesn’t matter if you’re travelling close to home or further away – accidents happen!
So, if you think the probability of having an accident is almost non-existent because you’re not driving as much, think again. There are still very real risks out there.
Worst case scenario: you’re involved in an accident with another driver where you’re at fault. If this happens and you don’t have car insurance, you’ll not only be faced with the costs to repair/replace your own car, you’ll be liable for the cost of someone else’s repairs. Ouch. Don’t let that person be you.
Your Car’s Still at Risk of Theft – Even at Home
In Australia, a car is stolen about every 12 minutes. Crazy, right?
According to the National Motor Vehicle Theft Reduction Council the majority of cars are stolen from our homes – using our keys!
Many thieves are opportunistic, meaning that forgetting to lock your car or leaving your front door unlocked (even when you’re home) can make you an easy target. Some will try their best no matter how secure a car or property looks. Scary.
With many people now facing loss of income due to business closures and staff layoffs, there could easily be a greater likelihood of some people resorting to drastic actions.
Think about the steps you can take to keep one of your biggest assets protected. Things like implementing simple daily actions to prevent car theft and having adequate insurance in case things go pear-shaped. Can you really afford to not be covered?
You Can’t Control the Weather
If the past couple of years taught us anything about weather, it’s that extreme events are becoming more and more frequent – potentially increasing our risk of damage or loss.
The possibility of damage from fire, flash-flooding, hail, trees, branches, power lines and debris is very real. And there’s no predicting where you’ll be when a weather event happens or whether it will affect you even if your car is at home.
Being mindful of these events is important, as is preparing for the worst in case something happens to your car. Can you afford the risk of losing your invaluable mode of transport?
Take Care if Your Car is Secured by a Bank Loan
Are you paying off a car loan with your bank? Or leasing your car? We recommend checking your contract (or calling your financier) before you resort to reducing or cancelling your insurance.
In most cases, your car is secured against the loan or lease, and you won’t own your car outright until you’ve paid out the full cost of the contract. And, as part of that contract, your financier (bank or leasing company) usually requires you to have adequate insurance for their asset.
Why? To protect it in case of damage or loss and you can’t pay out the loan.
By cancelling your insurance policy you’ll be in breach of your contract (and therefore in default). This might mean you become liable for extra fees and charges – or in some cases, payment of your car loan in full.
If this is you, it’s best to keep your insurance in force.
Maintain Your Good Rating (and Cheaper Premiums)
It goes without saying that it’s far less hassle to maintain your current insurance than to shop around for a new policy – but did you know it can also be cheaper?
There are many factors that go into an insurer determining insurance premiums. One of those is checking if there have been any gaps in your cover. If there are periods where you weren’t insured, you might be flagged as a higher risk and your premium might go up.
Not just that, but good driving records from previous policies sometimes don’t transfer from one policy to the next. You might need to prove yourself all over again and that takes time! This includes instances where you reduced your premium from comprehensive to third party insurance.
It can mean paying a higher premium than you’re used to. So, consider the impacts carefully when deciding whether to cancel your cover.
Compare Car Insurance Policies Before You Cancel
Not driving your car as much? You might decide to prepare it and store it for the time being. If you’re convinced that you can get a better deal on your car insurance, do your homework and check each policy to ensure you’re not under-insured.
If you’re shopping around, you might like to know that PD Insurance offers discounts on comprehensive car insurance for drivers who:
- are the only driver of your car,
- have had no claims in the last five years,
- decide to get a quote with us before your existing policy expires, or
- opt to pay your annual premium upfront.
Get Help if You’re Struggling
Sometimes you might feel like you don’t have a choice but to risk letting your insurance lapse. If this is you, we’re sorry to hear this. These are uncertain times, and it’s hard to predict how long we’ll be feeling the impacts of this virus.
If you’re experiencing financial difficulty or struggling with your mental health you’re not alone. There’s no need to feel ashamed or embarrassed.
Rather than hurriedly cancelling any financial commitments that help protect your way of life, you should know you can explore other options. For example, speak to your bank about any repayments you can put on hold or discuss a rental reduction with your landlord.
You could also:
- Find more info about the stimulus packages available to you now
- Read Money Smart’s FAQs on making financial decisions during this time
- Take a look at the Tenants’ Union of NSW need-to-know information about renting and COVID-19 (or similar in your state/territory).
For emergency financial relief in your area, check the DSS Grants Services Directory or contact these organisations that are equipped to help in this time of need:
After all, we want you to be covering all your bases if something were to go wrong.
Over to You – Should You Cancel Your Car Insurance?
Have you considered changing or cancelling your car insurance because of COVID-19? If so, what did you decide? Let us know in the comments below.