Car insurance premium increases explained

Your car insurance premiums may not always increase. However, it’s doubtful 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 may 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 the insurance industry to raise the price of premiums to reflect the price of cars and parts of cars as well.
• 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 higher 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 a hike in 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.

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, comparing policies when taking out or renewing car insurance 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 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 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 of the same make.
• Purchasing 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 run-ins with the law when it comes to driving or have previously made car insurance claims, your premiums will generally cost more than if you had 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 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 significantly impact how much your car insurance costs. For instance, Third Party Property Damage and Third Party Fire and Theft policies carry lower premiums than comprehensive policies, but this is because they offer less cover than comprehensive. Conversely, comprehensive car insurance covers your vehicle and others’ for accidents regardless of who’s at fault and also covers your vehicle for damage from weather events, fire and theft – but all this 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.

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 premium.
• 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.
• 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 and read your insurer’s Target Market Determination (TMD) to check if the policy is suitable for you.

If you’ve been involved in an at-fault accident (i.e. you cause an accident), it’s possible your insurance premium will increase to reflect your higher risk rating as a result. This may also affect your no claim bonus rating, which is based on your driving history.