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Your car insurance premium is the amount you agree to pay an insurance company in exchange for them insuring your vehicle. While having cover gives you peace of mind on the roads, you may find your car insurance premiums rise – even if your driving habits haven’t changed.

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

Why do car insurance premiums increase?

It’s highly unlikely that your 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. 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. According to the Reserve Bank of Australia, a car valued at $12,000 in the 2008/09 financial year would be valued at $14,785.43 in 2018/19 due to inflation;1
  • costs to the insurer. Just as the price of living for individuals increases, so does the cost of running a business. This may be reflected in your premiums. Similarly, Australian insurers must meet must specific regulatory requirements so they can pay out all claims when they need to;
  • 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 increase your premium the following year – even if you didn’t claim; and
  • more risk to insurers. If there’s been an increase in car crime, road fatalities, weather events or other factors you may claim on, it increases the risk for the insurer. As such, they may raise premiums to protect themselves.

Why do car insurance premiums differ between providers?

Car insurance is similar to other products you buy; two brands could be selling the same thing but offer them at different prices. The amount you end up paying 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 provider’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 aren’t limited to):

  • the level of cover you select. It’s a legal requirement for all Aussie drivers to take out Compulsory Third Party (CTP) insurance to cover liability for injury and death. Other third party policies including Third Party Property and Third Party Fire and Theft are cheaper than Comprehensive policies, but they primarily cover damage you cause to other cars and property, not your own. Conversely, Comprehensive insurance protects your vehicle in accidents and from weather events, but it will cost you more;
  • if you purchase extras. If you’ve taken out car insurance extras such as 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 claims in the past, your premiums are generally going to cost more than someone with a clean record;
  • how you plan on using the car. The more often you drive your car, the higher your premium is likely to be;
  • how frequently you’re paying premiums. Premiums being paid monthly versus annually may be more convenient, but you may be hit with an additional fee to do this;
  • agreed excess payment amount. If you agree for a lower excess (the amount you pay in the event of an accident), the premium you pay will usually be higher; and
  • your level of risk. Your friend may live in an area that’s considered less risky for car theft and may pay less for car insurance than you do. While you may not have claimed in several years, simply living in a higher crime area may affect your premiums.

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.

Possible ways to reduce premiums

While you won’t be able to change factors such as 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 will keep the cost of your premium down, but you’ll fork out more if you need to make a claim;
  • limiting drivers who use your car. Some insurers charge you more for additional drivers you list on your policy, so consider who will be using your vehicle regularly. Also be aware that you may be hit with extra fees if you add younger drivers, as they’re considered riskier for insurers;
  • 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 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; and
  • reviewing your cover. Just because you’ve been with the same insurer for many years, doesn’t mean you’re getting the best deal. It often pays to compare what’s out there. 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.


  1. Reserve Bank of Australia – ‘Inflation Calculator’ – Accessed November 2019

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