Car insurance for a vehicle you don’t drive

Got a car you don’t drive? Here’s how to put your car insurance cover on hold.

Car insurance is an essential expense when your vehicle is on the road, but what about when your vehicle is temporarily out of action? If you own a car you don’t drive – maybe it’s a sporty convertible you only take out in summer, or maybe your pride and joy is gathering mothballs while you’re posted overseas for work – putting your car insurance on hold is an easy way to save money.

But how do you press “pause” on your car insurance? Let’s take a closer look.

Why you might want to put your car insurance on hold

There are several reasons why you might want to temporarily suspend car insurance for a vehicle you’re not currently driving, including:

  • If your vehicle is kept in storage for much of the year
  • If your car is broken down and in need of repair
  • If you’ve been temporarily posted overseas for work
  • If you’re travelling overseas for an extended period, for example on a backpacking holiday
  • If you’re seriously ill or injured and unable to drive

What car insurance options are available?

Unsure what to do with your car insurance while your vehicle is out of action? Well, there are a few options to choose from:

  • Cancel your policy. The simplest option is to cancel your policy completely and then purchase new cover when your car is back on the road again. This means you won’t have to pay anything for insurance while your car is out of use, but also that you won’t have any cover in place against off-road risks like fire, theft and vandalism.
  • Reduce your level of cover. If you don’t want to cancel your policy, you may want to reduce your level of cover – for example, switching from a comprehensive car insurance policy to third party fire and theft cover. This allows you to save money on your premiums while still maintaining a certain level of cover for your vehicle.
  • Choose laid-up cover. Some insurers offer the option of laid-up cover, which is designed for vehicles that are off the road while they undergo repair or restoration. This allows you to insure your vehicle against a wide range of risks, but at the same time reduce your premium.
  • Choose restricted-use cover. Also known as pay as you drive car insurance, these policies allow you to save money by only insuring your car for a limited number of kilometres each year. The less you drive your car, the less you pay for insurance.
  • Suspend cover. In some cases, the insurer may be willing to let you suspend cover for a temporary period. However, this option is not commonly offered.
  • Remove yourself from cover. You may also want to consider removing yourself from your car insurance policy for a temporary period. If you’re no longer a listed driver, you can lower your premiums but still retain cover for anyone else who needs to drive the car.

Let’s break down the pros and cons of each of these options to see which one is right for you.

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Cancelling your car insurance policy

The first option is to cancel your car insurance cover altogether and then, when you’re ready to hit the road again, take out a new policy. This is the simplest way to save money on your premiums, as you won’t have to worry about paying for insurance the entire time your car is off the road.

Can you cancel car insurance at any time?

You’re free to cancel your car insurance with any insurer at any time. If you cancel within the cooling-off period, the insurer will refund 100% of any premium you’ve paid.

But if you cancel after the cooling-off period ends, you may be charged a cancellation fee. Many insurers will also refund the unused portion of your premium, but it’s worth checking the fine print to make sure of this before you cancel. If you’re paying your premiums by the month, there will be no need for a refund.

The biggest drawback to cancelling car insurance is that you won’t have any cover in place for your car. While you might think this isn’t a big deal – after all, your car is not being driven so it’s hardly going to be involved in an accident – it means you won’t be covered against a range of non-driving risks. Fire, storm, hail, falling trees, theft, vandalism and flood can all cause costly damage to your vehicle while it’s off the road, and without car insurance cover in place you’ll have to pay to repair the damage out of your own pocket.

There’s also the fact that if there’s finance owing on your vehicle, most car loan lenders require you to maintain comprehensive car insurance cover for the life of the loan. So if you haven’t paid out a loan secured by your vehicle, this option won’t be a viable choice.

Pros Cons
  • You can cancel at any time
  • Option offered by all insurers
  • The unused portion of your premium will usually be refunded
  • You won’t have to pay anything for car insurance while your vehicle is out of action
  • Cancellation fee may apply
  • Most car loan lenders require you to maintain insurance cover for the life of the loan
  • Your car won’t be covered for non-driving risks, for example storm damage, theft and vandalism
  • You’ll need to go through the hassle of cancelling, and then comparing policies and buying a new one at a later date

Reducing your level of car insurance cover

If you’re not comfortable cancelling your policy and you want to maintain a certain amount of protection, you may want to consider switching to a lower level of cover. So if you currently hold comprehensive car insurance, you could significantly reduce your premium by scaling back to a third party fire and theft car insurance policy. While the third party liability section of the policy wouldn’t be used because your car is off the road, you’d still be covered for loss or damage due to fire and theft.

However, there are downsides to this approach. First, the reduced level of cover may not be sufficient for your needs, as there are still non-driving risks (such as storm and flood) that could cause costly damage to your vehicle. Second, if you’re still paying off a car loan, you’ll typically need to have comprehensive car insurance in place.

Pros Cons
  • An easy way to save on car insurance premiums
  • Still covers your car against fire and theft
  • You’re still paying for third party liability cover which you won’t be using while your car is off the road
  • No cover for some other risks, such as storm and flood damage
  • If you have finance owing, the lender will usually require you to maintain comprehensive cover

Choosing laid-up car insurance cover

Is your car off the road and not being driven while it’s being repaired or restored? If so, you may want to search for an insurer that offers laid-up car insurance cover. Designed for car enthusiasts, these policies provide protection against a range of risks while your vehicle is off the road, including:

  • Fire, storm and flood damage
  • Damage from falling trees
  • Theft and vandalism
  • Theft of parts
  • Damage in transit
  • Damage at a repairer’s or restoration shop

However, while this solution is definitely worth considering for anyone restoring a car, it’s not suitable in all circumstances. If you’re going overseas for an extended period, for instance, then you’ll need to look at other options.

Pros Cons
  • Perfect if you’re restoring a vehicle
  • Covers a wide range of non-driving risks
  • Cheaper than buying comprehensive insurance for the same vehicle
  • Designed for car enthusiasts restoring unique or classic vehicles so is not suitable for everyone
  • More expensive than other options

Choosing restricted-use car insurance cover

Restricted-use policies are designed to help people who don’t drive their vehicle all that often save on the cost of car insurance. The premise behind these policies is simple: it doesn’t make sense that someone who drives 2,000km a year should pay the same for car insurance as someone who drives 20,000km a year, so they offer a way for you to only pay to cover the kilometres you actually drive.

If you know you won’t be driving your car for an extended period, such as 3 months out of the next 12, you can choose to insure it for a reduced number of kilometres. This can lead to a significantly reduced premium but still lets you enjoy the peace of mind of comprehensive insurance cover.

Pros Cons
  • Simple way to save on cover
  • Drive less, pay less
  • Still provides all the usual benefits of a comprehensive car insurance policy
  • You can top up your kilometre limit (for a cost) if you look like exceeding it
  • If you make a claim and you have exceeded the kilometre limit specified in your policy, an additional excess applies

Suspending car insurance cover

Going overseas? You can suspend some types of insurance, such as health insurance, for a limited period, so you may want to check with your insurer to find out whether it’s possible to temporarily suspend your car insurance cover. This would allow you to avoid the ongoing cost of premiums and to simply resume the same level of cover when you are ready, but this also means your vehicle won’t be covered during this period.

However, most insurers don’t allow you to suspend car insurance cover. Some may be willing to help you out in extreme circumstances such as serious illness or injury – and it can’t hurt to give your insurer a ring and ask whether this is possible – but you’ll usually be required to just cancel your cover or consider other options.

Pros Cons
  • You won’t have to pay for cover while you’re not using your car
  • Keep the policy and level of cover you want
  • No need to compare and choose a new policy
  • Option not offered by most insurers
  • Your car isn’t covered for non-driving risks such as fire, theft, vandalism and storm damage
  • If there is outstanding finance on your car, you’ll probably need to maintain car insurance cover at all times

Removing yourself from the policy

The final option is to consider temporarily removing yourself as a listed driver from your policy. If you know that you won’t be driving the vehicle for an extended period but other people will, this allows you to reduce the cost of insurance but still maintain the same level of cover.

Many insurers allow you to add or remove drivers from your policy online, but in some cases a phone call to the insurer may be required.

Of course, you’ll need to be sure you won’t need to drive the car when you’re not listed on this policy, as any incidents that occur with you behind the wheel could be very costly.

Pros Cons
  • Save money on premiums
  • Maintain the same level of cover for your car
  • It’s usually easy to remove a driver from your policy
  • If you’re not listed as a driver, either the policy won’t cover you when you get behind the wheel or you’ll be required to pay an unlisted driver excess should you need to claim

Can car insurance be transferred to another person?

No. Insurers consider a wide range of factors before deciding whether to insure you, including:

  • Your age
  • Your gender
  • Your driving experience
  • Your history of traffic infringements and penalties
  • Your claims history

Not only do these factors determine whether or not you will be covered, but they also affect your premium amount. As a result, you can’t transfer your car insurance to another person; they will have to apply for their own person.

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