Best Cheap Car Insurance For Australians

If two people approach an insurance company and apply for the same car insurance policy, it’s unlikely they will be quoted the same price for that cover. This is because car insurance premiums, whether they’re for third party policies or comprehensive cover, are based on how risky you appear as a driver.

Insurance providers take numerous factors into account when determining your risk profile, from your personal demographics to details about your car and your driving record. If they expect you’re more likely to make an insurance claim based on this information—and if they anticipate the claim will be more costly—then you’ll likely be charged a higher premium than others.

Every provider has its own methods for calculating premiums and may apply different weighting to certain factors in the risk mix. That’s why it’s important to compare quotes to find the most affordable offer that ticks all of your car insurance boxes.

When it comes to compulsory third party (CTP) car insurance, which every driver is legally required to hold in Australia, the factors that impact price vary based on the state or territory you live in. In some cases, private insurance companies administer this cover, so premiums are calculated in a similar way to optional car insurance policies.

Other states operate on a community model, where CTP prices are set by vehicle classes, not insurance history or demographics. However, these premiums generally have upper and lower limits, with factors like driving infringements and parking location still impacting price.

The cost of your car insurance depends on a range of factors. Some companies will issue quotes on the spot, while others such as Youi will require customers to enter their details, including driving history and gender, and then will call you back to work through a quote with you in person.

When Forbes Advisor Australia sought quotes for comprehensive car insurance from five of the most popular insurers in Australia—Budget Direct, Youi, AAMI, NRMA (RACV) and Allianz–we found the process to be slightly different for each. We submitted our details as a 46-year-old female from Victoria who is driving a Fiat Ritmo 2008.  She drives fewer than 5,000km per year and has one claim in the last five years, for which she was not at-fault.

The car is garaged at night and insured at market value. No additional drivers were added to the quote. Here is what we found.

1. Allianz Car Insurance

Allianz was by far the easiest and most straight-forward quotation process, offering us a quick quote in minutes.
Comprehensive insurance quote: $114.11 per month.

2. Budget Direct 

Budget Direct was similarly simple, but also asked about our driver rating, if we wanted to reduce our premiums by raising our excess (standard excess is $700) and if we wanted to restrict the driving age of other drivers to also lower premiums.
Comprehensive insurance quote: $92.68 AUD per month or $953.49 annually.

3. Youi

Youi prefers to provide comprehensive quotes tailored to each driver and was not able to supply a rough estimate based on online details that we entered. Instead they scheduled a call-back to discuss options.
Comprehensive insurance quote: TBC

4. RACV

Although we initially sought a quote from NRMA, as the car is registered in Victoria we were instead transferred to the state-based motoring body RACV. RACV asked a series of questions via an online form, and applied a minimum excess of $900.
Comprehensive insurance quote: $125.66 per month or $1299.94 if paid up-front. Third party property damage was much cheaper at $51.13 per month.

5. AAMI

By far the cheapest of the online quotes, AAMI asked a series of detailed questions on driving usage and patterns that rewards those who do not drive in peak times or use their car to commute to work. A standard $750 excess applies.
Comprehensive insurance quote: $54.92 per month or $540.87 per year. Third party only was also available for $34.47 per month.

While every provider has its own method for calculating premiums, there are a few common factors that will usually be considered. You’ll usually be asked to provide this information when you apply for car insurance:

Age: Insurance providers consider young or inexperienced drivers as more risky (which is reflected in road accident statistics), so those new to the road will usually pay a higher premium.

Gender: Women may be quoted slightly lower premiums, as women are statistically less likely to be involved in accidents or violate road rules. Insurance companies may refer to road crash and casualty statistics showing gender-based trends when weighing this up.

Location: Living in an area with higher levels of crime or road incidents that result in insurance claims will generally increase premiums.

Where you park: Parking on the roadside instead of a secure garage increases chances of vandalism, theft and side-swiping, which could result in an insurance claim.

Driving history: If your road record is tarnished with traffic offences, demerit points and a history of crashes, you may be quoted more costly insurance.

Insurance history: Making insurance claims usually results in a higher premium at renewal time, but if you have a claim-free history, you could score discounts. Holding insurance with the same provider for a certain number of years could also shave money off your premium, but this can also work in reverse, too: the longer you are with an insurer, the more you miss out on the sign-up and introductory offers that lure in new customers. It’s known as the loyalty tax.

Car model, age and modifications: If your insurance covers damages to your own car (i.e. fire and theft or comprehensive), your car’s specs will impact the premium. Providers need to know the cost of repairing or replacing your vehicle, and doing so for certain models and modifications will cost more than others.

Car valuation: You and the insurance company must agree on what your car is worth if you’re covering it for damages. You can usually choose between the ‘market value’ (a reasonable selling price at the time you make a claim) or an ‘agreed value’ which you set for the entire policy period. Market value is generally the cheaper option, as it isn’t based on customer preference and can vary alongside the car market.

Excess choices: When you make an insurance claim, you usually pay an agreed fee (the ‘excess’) before the policy covers the remaining costs of the damages. Setting your excess higher will generally decrease your premium, and vice versa.

Policy level: The more your car insurance covers, the more it will cost. Third-party policies are generally the cheapest option, followed by fire and theft cover and then comprehensive car insurance.

Here are a few ways to cut your car insurance premiums

Purchase New Policies Online

If you are taking out car insurance for the first time or looking to switch providers, apply online. You’ll often be rewarded with a discount for saving the insurance company’s time compared to an application submitted over the phone or in person. These discounts often range from 5% to 20%, but are usually only applied to the first year of your premium.

Pay Annually

Some insurance providers will reward customers who pay their premium in full up-front. Having the option to pay monthly or even weekly may work better in your budget, so be sure to carefully consider each option when signing your insurance contract.

Bundle Your Insurance

If you need home, contents or life insurance, or have other cars in your household that need insuring, you can often bundle these in a multi-policy or multi-car deal with a single provider and earn a discount. Be sure to compare other options and providers for each of these insurance products to ensure the discount makes it the most competitive option for you.

Drive Less

Many car insurance companies now offer or specialise in pay-as-you-drive cover that rewards those who drive less and are therefore are less likely to be involved in an accident. Most of these policies set a limit on the distance you drive each year (usually less than 20,000 km), and as long as you stay below the limit, you receive a premium reduction. This is a great option for people driving infrequently, or those who use public transport for regular commuting. Make sure you stick to the limit, as you won’t be covered if you exceed it and get in an accident. You can usually increase the limit if necessary, but this can come with a fee.

Stay Loyal to Your Insurance Provider

If you hold insurance with the same provider for many years, you may be offered a loyalty discount. This usually increases over time, often starting at 5% or less for a few years’ loyalty,  but climbing beyond a 60% discount once you get into the decades territory. You may need to contact your provider to receive this discount.

Don’t Make Claims Unless Necessary

If you’re lucky enough to avoid situations where an insurance claim is required for a number of years, you may receive or request a no-claims discount. Saving the insurance company money in this way could earn you as much as a 70% discount over time, and it’s often transferable if you change providers. Just remember if you do make a claim, this discount will usually be dropped, unless you are deemed to be not at fault.

Don’t Let Everyone Drive Your Car

Do any young or inexperienced drivers use your car? If the answer is ‘no’, then let your insurance company know about it and you could score a restricted driver discount. These types of drivers are statistically more likely to get in a road accident or make an insurance claim, so banning them from sitting behind your wheel is a good way to avoid that risk and keep your premiums down.

Compare the Market and Switch to a Cheaper Option

It’s a good idea to reassess your car insurance in the lead up to your policy renewal each year. If you get a few quotes from other providers and find a better deal, consider switching providers. Be sure to communicate this with your current car insurance company first—they may match or beat the offers you have on the table to retain you as a customer.

In August 2023, the Australian Prudential Regulation Authority (APRA) noted that insurance companies raised premiums over the last quarter “in response to recent higher claims costs”. This increase isn’t tied to a rising number of claims, but rather what it costs insurance providers to fulfil claims. This is often outside of a customer’s control, generally coming down to a combination of four main factors: inflation, taxes, natural disasters and personal circumstances.

Inflation: This will be biting many motorists the hardest at the moment. The consumer price index (CPI) has seen seismic shifts over the last two years. Most recently, it was recorded as rising 4% in the monthly CPI update which is still above the Reserve Bank’s 2% to 3% target. Insurance costs, like most other goods and services, increase as inflation rises, reflecting the higher cost of organising spare parts and repairs, as well as the overall value of insured vehicles.

Taxes: If the governing bodies in your state or territory decide to increase duties and levies related to road users, this will impact your premium (including CTP). States may periodically review these costs and overhaul compulsory insurance requirements if they recognise that costs are unmanageable or coverage isn’t suitable.

Natural disasters: Whether it’s storms, fires, floods or hail, unforeseeable natural events spark insurance claims which drives up premiums. Insurance Australia Group (IAG)—the country’s biggest general insurance company that underwrites brands including NRMA Insurance, CGU, SGIO and many others—notes in its 2024 first earnings report “natural perils” were key drivers of rising insurance premiums.

Changes to Your Circumstances: If over the course of your last coverage period you’ve made a car insurance claim, received road fines or moved somewhere with a higher crime rate, you’ll likely see a premium increase. On paper, changes like these increase the probability that you may be involved in future incidents that could result in an insurance claim. Insurance companies try to mitigate the potential risk of having to pay out claims by charging you more.

You’d be surprised by how flexible  insurance companies can be when it comes to price. If you come properly prepared, you may be able to knock a considerable amount off of your premium. Follow the tips below to help you haggle down your car insurance costs.

1. Do your research: Whether you want to switch providers or stay where you are with a better deal, you need to have an accurate understanding of the current car insurance market and the cards you hold as a driver. All insurance providers must list the product disclosure statement (PDS) for each policy online, and there are numerous online resources for additional insight. Read through all of this information to better understand what is and isn’t commonly covered by your preferred insurance companies. It also costs nothing to get an online quote, so fill out a few and see what kind of premiums you’re offered based on your personal circumstances.
2. Approach your current insurance provider with quotes: Even if you find a cheaper policy on the market with more features, it’s worth asking your current provider if they can match this price or inclusions. It’s in their best interest to keep you as a customer, but you may also have accrued loyalty discounts or other bonuses with this company that are worth keeping. The ideal time to have this conversation is towards the end of your policy period, as it creates some urgency for the provider to offer a better deal to keep you on.
3. Reference changes in your circumstances: If you’re driving less or no longer classify as a young or inexperienced driver, make sure your insurance company knows about it. These factors and a stellar driving and claims history make you an appealing insurance customer.
4. Be ready to bluff, but also to walk away. If your provider knows you’re serious about potentially switching policies, they may be more likely to meet your request. But if they’re not willing to give an inch and there is a superior policy that will be more affordable in the long run, be prepared to make the switch.
5. Nervous? Haggle online. If you get a little flustered by confrontation over the phone, put all of this information down in writing instead. Most insurance customers are happy to negotiate (to a point) via email or web-chat, so take that route if it’s going to serve you best.