How to Lower Your Out-of-Pocket Repair Costs

Mar 3, 2025 DPP No Comments

How to Lower Your Out-of-Pocket Repair Costs

Car accidents are stressful, and the financial burden that comes with repairs can make the situation even worse. Many Australians assume that having car insurance will cover all their expenses, only to find out that they still have to pay a significant amount out-of-pocket. From insurance excess fees to policy exclusions, there are numerous factors that can contribute to unexpected costs after a crash.

Understanding how car insurance works, what your policy covers, and how to choose the right repair options can help you minimise these expenses. A well-informed approach can prevent situations where you’re left paying thousands of dollars due to inadequate insurance or poor repair choices.

Choosing the right level of coverage, knowing how excess payments work, and understanding when to make a claim are all essential strategies in keeping costs under control. Furthermore, shopping around for the best repair shops, avoiding unnecessary claims, and maintaining a good driving record can all contribute to long-term savings.

This guide will provide practical and easy-to-follow advice to help Australian drivers avoid high out-of-pocket costs when dealing with insurance claims and vehicle repairs. By taking the right steps before an accident even occurs, you can protect yourself from financial surprises and ensure a smoother recovery process if your car is damaged.

Understanding Car Insurance in Australia

Car insurance is essential for protecting yourself financially in case of an accident, but not all policies offer the same level of coverage. Many Australians are caught off guard by high out-of-pocket expenses simply because they don’t fully understand what their policy includes and excludes.

Types of Car Insurance

In Australia, there are four main types of car insurance:

Compulsory Third-Party (CTP) Insurance – This is mandatory in all states and covers injury or death caused to others in an accident. However, it does not cover any damage to your vehicle or other people’s property.
Third-Party Property Damage Insurance – Covers damage caused to other people’s property (such as their car or home) but does not cover your own vehicle.
Third-Party Fire and Theft Insurance – Includes third-party property damage cover, plus protection if your car is stolen or damaged by fire.
Comprehensive Insurance – The highest level of cover, this includes damage to your own vehicle, damage to other people’s property, and protection against theft, fire, and weather-related damage.

Choosing the Right Policy

Selecting the right insurance policy is one of the most effective ways to avoid high out-of-pocket expenses. Comprehensive insurance offers the broadest protection, but it comes at a higher premium. If you drive a newer or more expensive car, this type of coverage is often necessary to avoid significant repair costs. On the other hand, if you drive an older vehicle, a third-party policy might be sufficient.

Always review your policy carefully, compare insurers, and consider additional features like windscreen cover or hire car options to ensure you are adequately protected.

How Excess Works and Its Impact on Out-of-Pocket Costs

Excess is one of the most overlooked aspects of car insurance, yet it plays a crucial role in determining how much you’ll pay out-of-pocket in the event of a claim. When you make an insurance claim, the excess is the fixed amount you must contribute towards the repair costs before your insurer covers the rest.

Types of Excess

Different types of excess may apply depending on your insurer and your policy:

Standard Excess – The base amount you must pay when making a claim. This is determined when you purchase your policy.
Voluntary Excess – Some insurers allow you to choose a higher voluntary excess in exchange for lower premiums. While this can save you money on insurance costs, it means you’ll pay more if you ever need to make a claim.
Age Excess – If a driver under a certain age (usually under 25) is involved in an accident while driving your car, an additional excess applies.
Inexperienced Driver Excess – This applies to drivers who have held their licence for less than two years, regardless of their age.
Undeclared Driver Excess – If someone not listed on your policy is driving your car at the time of an accident, your insurer may charge an additional excess.

Managing Excess to Reduce Costs

To minimise out-of-pocket expenses, carefully consider your excess when selecting a policy. A higher excess lowers your premium but increases the amount you must pay if you make a claim. If you prefer peace of mind and lower costs in an emergency, opting for a lower excess is the better choice. Always check how multiple excesses apply, as they can add up significantly.

Strategies to Avoid High Out-of-Pocket Costs

While car insurance provides financial protection, there are several proactive steps you can take to reduce your potential out-of-pocket expenses. Many drivers only consider costs after an accident, but making smart choices beforehand can help minimise financial strain if a claim is needed.

Maintain a No-Claims Discount

Many insurers offer a no-claims discount (NCD) or safe driver discount for policyholders who avoid making claims over a certain period. This discount can significantly reduce your premiums over time, helping you save hundreds of dollars each year. Even minor accidents can impact your discount, so if the repair cost is close to your excess, consider paying for it out-of-pocket rather than lodging a claim.

Shop Around for the Best Insurance Policy

Insurance premiums vary widely between providers. It’s essential to compare policies regularly to ensure you’re getting the best deal. Many Australians stick with the same insurer for years, assuming they’re getting a good rate, but loyalty doesn’t always pay off. Use insurance comparison websites and request quotes from multiple providers to find a policy that offers the right balance between premium costs and excess fees.

Understand Policy Inclusions and Exclusions

One of the biggest mistakes drivers make is assuming their policy covers everything. Always read the Product Disclosure Statement (PDS) to understand what is included and excluded in your policy. Some policies exclude coverage for certain types of damage (e.g., flood damage or mechanical failures), which could leave you with unexpected expenses if you’re not prepared.

Choosing the Right Repair Options to Minimise Costs

The cost of repairing a vehicle after an accident can vary significantly depending on where and how the repairs are carried out. Many drivers assume that their insurer will always cover the full cost of repairs, but in reality, there are several factors that can lead to high out-of-pocket expenses.

Preferred Repairers vs. Your Own Choice

Most insurers have preferred repairers, which are repair shops approved by the insurance company. Using a preferred repairer can help reduce costs as these shops often have agreements with insurers to keep repair expenses lower. However, some policies allow you to choose your own repairer, which can be beneficial if you prefer a specific mechanic or want to ensure the highest-quality repairs. Keep in mind that choosing your own repairer may result in additional costs if the insurer determines their quote is too high.

Getting Multiple Repair Quotes

If you are paying for repairs out-of-pocket or considering whether to make an insurance claim, it’s always a good idea to obtain multiple quotes. Some repairers may charge significantly more than others for the same work. Comparing estimates can help you find the best balance between cost and quality.

Checking for Hidden Costs

Be aware of hidden costs that may arise during the repair process, such as fees for additional parts, labour, or diagnostic tests. Some policies cover replacement parts only if they are aftermarket or reconditioned, which could impact the quality of your repair. Always confirm with your insurer what type of parts will be used before authorising repairs.

When to Make an Insurance Claim (and When Not To)

Filing an insurance claim isn’t always the best option, especially when considering how it may impact your future premiums. Understanding when to claim and when to cover costs yourself can help you avoid unnecessary out-of-pocket expenses in the long run.

Assessing the Cost of Repairs vs. Your Excess

Before lodging a claim, compare the estimated repair cost with your insurance excess. If the cost of repairs is only slightly higher than your excess, it may be more cost-effective to pay for the repairs yourself. For example, if your excess is $750 and the repair costs $1,000, claiming would only save you $250 but could lead to a higher premium in the future.

Impact on Future Premiums

Many insurance companies increase premiums for policyholders who make frequent claims. Even if a claim is approved, your insurer may see you as a higher risk, leading to increased costs when renewing your policy. If you have a no-claims discount, making a claim could cause you to lose this benefit, further increasing future premiums.

Third-Party Claims

If you’re at fault in an accident and damage another person’s vehicle or property, your insurance can cover the costs. However, if the damage is minor and repair costs are reasonable, settling privately may be an option. Be cautious, though—if additional damage is discovered later, you could be liable for further costs without insurance coverage. Always document agreements in writing when handling third-party claims privately.

Reducing Insurance Premiums to Lower Long-Term Costs

One of the best ways to avoid high out-of-pocket costs is by keeping your insurance premiums affordable while maintaining good coverage. Many Australians unknowingly pay more than necessary for car insurance because they don’t regularly review their policy or explore ways to lower their costs.

Increase Your Excess (If You Can Afford It)

Choosing a higher voluntary excess can significantly reduce your insurance premiums. If you are a safe driver and unlikely to make frequent claims, increasing your excess from $500 to $1,000, for example, could result in lower monthly or annual costs. However, ensure you can afford the higher excess amount if you do need to make a claim.

Bundle Your Insurance Policies

Many insurers offer multi-policy discounts when you bundle car insurance with home, contents, or other types of coverage. This can lead to substantial savings on your overall insurance costs.

Compare Policies Regularly

Loyalty doesn’t always pay off when it comes to car insurance. Compare different insurers each year to find the best deal, as companies frequently adjust their rates and offer new discounts. Use comparison websites or speak with an insurance broker to find policies that balance cost and coverage effectively.

Maintain a Clean Driving Record

A safe driving history can lead to lower premiums. Avoiding speeding fines, at-fault accidents, and other traffic offences helps you qualify for no-claims discounts and other savings over time. Many insurers reward long-term, low-risk drivers with better rates.

The Impact of External Factors on Insurance Costs

While you have control over some aspects of your car insurance costs, external factors can also influence your premiums and potential out-of-pocket expenses. Understanding these factors can help you make informed decisions when selecting coverage and budgeting for future costs.

Rising Insurance Premiums in Australia

Over the past few years, car insurance premiums have been steadily increasing due to a range of factors. Extreme weather events, such as floods and bushfires, have led to more claims, forcing insurers to raise premiums to cover their costs. Additionally, inflation has driven up the price of vehicle repairs, parts, and labour, all of which contribute to higher overall insurance costs.

Supply Chain and Repair Costs

The rising cost of vehicle repairs has also impacted insurance premiums. Modern cars are increasingly reliant on advanced technology, such as sensors and cameras for driver assistance features. While these systems improve safety, they are expensive to repair or replace after a crash. In some cases, even a minor accident can require costly recalibrations, significantly increasing the repair bill.

The Role of Your Location

Where you live can affect your insurance rates and the likelihood of high out-of-pocket expenses. Insurers assess risks based on postcode data, meaning areas with higher crime rates, more traffic congestion, or greater exposure to extreme weather may attract higher premiums. If you’re moving house, consider how your new location might impact your insurance costs.

Being aware of these external factors can help you plan ahead, ensuring that you’re not caught off guard by unexpected premium hikes or repair costs.

Avoiding Common Pitfalls That Lead to Higher Costs

Many Australians unknowingly make mistakes when it comes to their car insurance and crash repairs, leading to unexpected out-of-pocket expenses. By understanding these common pitfalls, you can take proactive steps to avoid unnecessary financial strain.

Not Reading the Product Disclosure Statement (PDS)

One of the biggest mistakes drivers make is assuming their policy covers everything. Every car insurance policy comes with a Product Disclosure Statement (PDS), which outlines inclusions, exclusions, and any limits on claims. Failing to read this document can result in nasty surprises, such as finding out your policy doesn’t cover damage from floods, hail, or vandalism.

Failing to Notify Your Insurer of Modifications

If you’ve made modifications to your car, such as adding aftermarket rims, upgrading the exhaust system, or installing a new stereo, you must inform your insurer. Many insurance companies will refuse to cover unapproved modifications, leaving you to pay out-of-pocket if your car is damaged.

Letting Your Policy Lapse

It may seem obvious, but allowing your insurance policy to lapse due to missed payments can leave you completely unprotected in the event of an accident. Even a brief lapse in coverage could mean denied claims or higher premiums when you try to reinstate your policy. Always set up automatic payments or reminders to ensure your cover remains active.

Not Updating Your Agreed Value

If your policy is based on an agreed value, rather than market value, it’s important to update it regularly. The market value of cars depreciates over time, so if your agreed value is too low, you may not receive enough from a payout to replace or repair your vehicle adequately.

What to Do After an Accident to Minimise Costs

Knowing what to do immediately after an accident can help you avoid unnecessary expenses and ensure you handle the situation correctly with your insurer and repairer. A well-documented accident report and quick decision-making can protect you from disputes and unexpected costs.

Gather Evidence at the Scene

After a crash, collect as much information as possible to ensure an accurate insurance claim and avoid being held liable for damages you didn’t cause. This includes:

Taking clear photos of all vehicles involved, their number plates, and any damage.
Getting contact details of other drivers, witnesses, and passengers.
Noting weather and road conditions at the time of the crash.
Filing a police report if required (especially for major accidents or hit-and-runs).

Notify Your Insurer Promptly

Many policies require you to report an accident within a certain timeframe. Delaying your claim could result in a denied or delayed payout, leaving you to cover repair costs. If the damage is minor and you are unsure whether to claim, contact your insurer for advice before making a decision.

Avoid Admitting Fault

Never admit fault at the scene, even if you think you caused the accident. Let the insurance companies determine liability based on evidence. Admitting fault prematurely can result in higher out-of-pocket expenses if the other party claims damages.

Keep Records of All Communication

If you discuss repairs, liability, or settlements with another driver, their insurer, or repair shops, always keep a written record. This protects you in case of disputes or unexpected costs later on.

Final Tips for Keeping Crash Repair Costs Manageable

Avoiding high out-of-pocket costs for car repairs requires a proactive approach. By understanding your insurance policy, knowing when to make a claim, and choosing the right repair options, you can significantly reduce unexpected expenses.

Consider Pay-As-You-Drive Insurance

If you don’t drive often, pay-as-you-drive (PAYD) insurance can be a cost-effective alternative to standard policies. Some insurers offer lower premiums for drivers who travel fewer kilometres per year, helping to reduce ongoing insurance costs while still providing coverage in case of an accident.

Use an Accredited Repairer

Always choose a licensed and accredited repairer to ensure quality repairs. While it may be tempting to go for the cheapest option, poor-quality repairs can lead to safety issues, further damage, or higher costs down the line if the job needs to be redone. Look for repairers accredited by industry bodies like the Motor Trades Association (MTA) or those recommended by your insurer.

Ask About Warranties on Repairs

Reputable repair shops offer warranties on parts and labour. This means if something goes wrong with the repair within a specified period, the repairer will fix it at no extra cost. Always ask about warranty policies before agreeing to any work.

Stay Informed and Review Your Policy Annually

Insurance policies, premiums, and coverage options change regularly. Review your policy every 12 months to ensure you’re still getting the best deal. Updating your coverage, adjusting your excess, and taking advantage of discounts can keep your long-term costs lower while ensuring you remain adequately protected.