Are you making this critical car insurance mistake? This two-minute quiz will tell you

You pay thousands of dollars every year for your car insurance, but are you actually covered when you need it most?

It's a shocking fact that many Aussie drivers assume they are, only to discover at the worst possible moment that a single 'fine print' trap means their claim is denied.

It’s a potentially costly mistake you simply can't afford to make.

We've created a 2-minute 'gotcha' quiz to see if you're smarter than your policy. The wrong answer could reveal a surprising gap in your policy knowledge.

Let’s get started!

Gotcha #1: The 'market vs. agreed' mix-up

The Scenario: You buy a used car for $25,000 and insure it under a comprehensive car insurance policy for 'market value'. One year later, you cause an accident and total your ride.The insurer offers you an $18,000 payout, which isn't enough to buy a similar car. Can they do this?

The Answer: YES

This is a classic case of 'market value' vs ‘agreed value’ mix-up. Market value means the insurer pays what your car was worth the moment before the crash. Unfortunately, the full year of depreciation shows your car was only worth $18,000 before you totaled it - so that’s all you’ll get back.

To get the full $25,000 you would have had to take out an 'agreed value' policy, where you and the insurer agree on a specific payout amount, in this case $25,000. These do tend to cost more, but you’ll get more certainty in return. 

Gotcha #2: The 'undeclared mods' problem

The Scenario: After you insure your car, you decide to add a sweet set of alloy wheels and a new roofrack for the ol’ surfboard - but you didn’t tell your insurer about the new additions. A few months later a hailstorm damages the bonnet of your car and smashes out the windshield. Are you covered? 

The answer: QUITE POSSIBLY NOT

Most insurance policies contain a clause requiring you to tell them about any new modifications to your car, no matter how insignificant they may seem. 

Even if the new modifications didn’t cause the damage, or weren’t themselves damaged, your entire claim could be reduced or denied, due to breach of contract. 

By failing to notify your insurer about the modifications, you’ve denied them the ability to assess the modifications to adjust your premium accordingly and/or determine if the modifications were acceptable in the first place.

To avoid this, make sure to inform your insurer about any modifications before, or very soon after making them. Keep your receipts, so the insurer can assess their proper value. 

Gotcha #3: The 'choice of repairer' catch

The Scenario: You sideswipe a pole in your new Golf, ouch! On your car insurance policy, you paid for the option to choose your own repairer, so that only your trusted mechanic gets to lay his hands on your ride. He quotes you $5,000, so you send your quote to your insurer. A day later, they call back and say they will only pay $3,500 for the repair. Can they do this?

The Answer: YEP, THEY OFTEN CAN.

Having the right to choose your own repairer means only that. You get to choose who works on your car. What it doesn’t mean is that the insurer has to accept any quote, no questions asked. 

Most policies will contain a ‘reasonable costs’ clause that means they’re only required to pay what they deem reasonable. And it’s hard to argue against their definition of reasonable, since their figure is based on hundreds or even thousands of similar cases they’ve dealt with in the past through their own network of repairers.

It’s possible the insurer would try to negotiate with your mechanic, but if your guy won't budge, the insurer will probably stick to their $3,500 offer. You're then left to either pay the $1,500 gap yourself (in addition to your excess) or give in and use one of their approved shops.

Were you caught out?

So, how'd you go? Whether you aced it or not, these gotchas show just how easy it is to get caught out. It's a horrible feeling to be in a fight with your insurer when you just want your car fixed. That fine print is the literal rulebook for your claim, and insurers will follow it precisely. The only way to know the rules is to actually read your product disclosure statement (PDS). It's a boring job, but it could save you thousands.