Tyre and rim insurance
Added protection or unnecessary cost?
If you buy a car from a car dealership, you might be offered
tyre and rim insurance to protect these parts of your car. Here we
explain what these policies cover, and why they might not be good
What is tyre and rim
Tyre and rim insurance is an add-on insurance policy that a car
dealer might offer you when you buy a car. It covers damage to
tyres and rims that occur as a result of blowouts, punctures and
various road hazards (like driving through a pothole). Unlike
comprehensive insurance, tyre and rim cover does not usually cover
for damage that occurs as part of an accident. Also, general wear
and tear is typically excluded.
Do I need tyre and rim cover?
Before you buy this type of policy, work out how much it would
cost to pay to repair or replace your tyres if they were damaged.
Depending on the type of car you have, the cost of repairing or
replacing your tyres and rims might be a lot less than the cost of
the insurance policy.
Things you should know before you
Car dealers get commissions
Car dealers receive a commission when they sell these insurance
policies. The incentive to make the sale might be in their best
interests but might not be in yours.
Tyre and rim insurance only covers you for a limited range of
situations. This means the chance of you making a claim on your
policy can be quite low and, even if you do make a claim, the
payout may be lower than the premiums you have paid.
Adds to your loan costs
Tyre and rim policies often charge premiums that are packaged
into your car loan. Because you pay interest on the premiums, the
insurance is even more expensive and the amount you have to borrow
Our MoneySmart Cars app can help you work out the real cost of
buying a car and crunch the figures on add-on insurance.
Work out the real cost of buying and running a
MoneySmart Cars app
Cancellations and refunds
Most policies have a cooling-off period when you can cancel the
policy at no cost, but if you cancel after this period you may have
to pay cancellation fees or administrative charges.
Making a claim, cancelling or complaining (H3)
See our add-on insurance webpage for details
on how to make a claim on your insurance policy, cancel it or make
What to ask before getting tyre and rim insurance
Here are some questions to ask if you are offered a tyre and rim
policy by a car dealer:
- Cost - Ask for the full cost of the premium,
including the cost of any interest payable if it is added to your
- Inclusions, restrictions and exclusions - Find
out what is - and is not - covered. Make sure the coverage is worth
- Coverage period - Find out how long you will
be covered for.
- Commission - Ask the car dealer how much
commission they'll get if you buy the insurance policy.
- Cooling off period - How long is the cooling
off period? Then you know how much time you'll have to cancel the
policy at no cost.
There are a lot of decisions to make when it
comes to buying a car. Before you buy tyre and rim insurance, make
sure you understand what the policy costs and what it includes.
Last updated: 30 Jan 2017