Explore Car Insurance

Your car insurance premium is the amount you agree to pay an insurance company in exchange for them insuring your vehicle. While having cover has a great many benefits and advantages, you may find your car insurance premiums still rise even if your driving habits haven’t changed and you’ve made no claims.

There’s no single reason why the cost of car insurance goes up; instead, a variety of factors may determine why you’re hit with a premium increase for car insurance.

Why does car insurance go up every year?

It’s highly unlikely that your car insurance policy’s premium will remain the same when it comes time to renew your car insurance. Here are some reasons why car insurance premiums increase:

  • Changes in personal circumstances. Moving to a suburb with a higher crime rate, changing how frequently you drive or even parking your car differently could result in increased premiums.
  • Inflation. This affects most items you purchase, and vehicles are no exception. As such, it’s common for insurers to raise the price of premiums to reflect the price of cars and parts of cars as well. Australian insurers must meet specific regulatory requirements so they can pay out all claims when they need to.
  • Costs to the insurer. Just as the cost of living for individuals increases, so does the cost of running a business. This may be reflected in your premiums
  • Increase in natural disasters. If there’s been a high number of floods, fires, storms or other natural weather events, this increases the number of claims insurers must pay and may contribute to the increase your premium the following year, even if you didn’t claim.
  • More risk to insurers. If there’s been an increase in car crime, road fatalities or other factors you may claim on, it increases the risk for the insurer. As such, they may increase insurance prices to protect themselves.

A man reviewing his car insurance premium increase notice

Why do car insurance premiums differ between insurance providers?

Car insurance works like other products you buy; two brands could be selling the same thing but offer quite different insurance quotes. The price is typically based on factors and information unique to each company. Along with business costs, these may include insurance risk statistics or claim history by customers.

For example, one insurer may determine you live in an area that’s had a high number of car thefts based on its customer claiming data, while the risk for the same suburb could differ based on another insurer’s research. As such, it’s a good idea to compare policies when taking out or renewing car insurance, as it could save you money. Our car insurance comparison service is free, easy to use and gives you an array of car insurance options in minutes.

Why does my car insurance seem expensive compared to others?

‘Why is car insurance so expensive?’ is a question many drivers ask when it comes to protecting their car. Several factors can affect how much you pay for insurance, including (but not limited to):

  • Your car’s value. The value of your car is insured for influences how much you pay for your insurance when you first take out cover. New cars often have a higher market value than older vehicles.
  • If you purchase extras. If you’ve added car insurance extras (such as a hire car or roadside assist), they may come at an additional cost.
  • Your driving and claims history. If you’ve had several run-ins with the law when it comes to driving or have made car insurance claims in the past, your premiums are generally going to cost more than someone with a clean record.
  • Other drivers on the policy. You can insure multiple drivers for your car, but insurers will then factor in the risks of insuring these other drivers in addition to the main policyholder.
  • How you plan on using the car. The more often you drive your car, based on the kilometres per year you drive, the higher your premium is likely to be.
  • How frequently you’re paying premiums. Premiums paid monthly versus annually may be more convenient, but in most cases you’ll find that paying an annual sum comes cheaper.
  • Excess amount. If you choose a lower excess (the amount you pay in the event of an accident), the premium you pay will usually be higher.
  • Your level of risk. You may live in an area that’s considered less risky for car theft, and so you might pay less for car insurance. While you may not have claimed in several years, simply living in a higher crime area may also affect your premiums.

Furthermore, the type of policy you buy will also have a major impact on how much your car insurance costs. For instance, Third Party Property Damage and Third Party Fire and Theft policies are cheaper than comprehensive policies, but this is because they offer less cover than comprehensive. Conversely, comprehensive insurance covers your vehicle and others’ for accidents regardless of who’s at fault and also covers your vehicle from damage from weather events, fire and theft but will cost you more.

Of course, personal factors such as your location, where you park your car and how old you are also impact how much you pay for car insurance. Keep in mind that insurance is based on your individual circumstances and can’t always be compared to what others are paying. Discover more about how car insurance is calculated.

A woman leaning out of a car

How you can reduce your premiums

While you won’t be able to influence factors like inflation or the cost of living, there are other ways you may be able to reduce your car insurance premiums, including:

  • Opting for a higher excess. Higher excesses may keep the cost of your premium down, but keep in mind that you’ll fork out more if you need to make a claim.
  • Limiting drivers who use your car. Some insurers let you set an age restriction on who is insured to drive your car, which can help discount the cost of your
  • Paying for what you need. Why pay for additional cover or extras if you don’t need them? Consider your circumstances and talk to your insurer about catering to your needs.
  • Considering what you claim. Premiums may increase with every claim you make, so consider if you really need to claim through your insurer for small bumps, dents or issues you can easily fix.
  • Bundle your insurance together. If your insurer offers a range of products besides car insurance (like home insurance), you may get a discount by taking out multiple policies with them. these discounts are often only valid for the first year so compare your options first to make sure you’re not missing out on potential savings elsewhere.
  • Reviewing your cover. Just because you’ve been with the same insurer for many years, doesn’t mean you’re getting the best deal, and it often pays to compare what’s out there as insurance rates are constantly evolving. Our free comparison service is easy to use and lets you compare a range of premiums, extras, cover options and exclusions in a matter of minutes.

Always consider your circumstances when making choices related to your car insurance, as what may work for some may not be ideal for others. You can view the full details of any policy in the relevant Product Disclosure Statement (PDS) before you buy.

Stephen Zeller, General Manager

Tips on handling car insurance premium increases from our expert, Stephen Zeller

  1. You should compare your car insurance policy (as a minimum) every 12 months when you receive your renewal notice. What was an acceptable premium 12 months ago may now be a bad deal compared to what’s in the market.
  2. Many consumers receive their renewals via email and, as a result, may forget about it. This could potentially cost you hundreds of dollars. When you receive your renewal via email, print it out and put it on the fridge so you don’t forget it.
  3. Have your circumstances changed (e.g. you’ve changed address or used your car less)? If so, you should let your insurer know immediately as you might be on the wrong type of policy or be eligible for a refund if you’ve moved to a less risky area.
  4. If you’re managing a tight budget, savings can often be found by comparing car insurance policies. If you decide to stay with your current insurer, see if you can restrict the age of drivers or increase your excess payment to lower the cost of your policy (your excess is the amount you pay should you make a claim, so remember to choose an excess that is manageable).
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