Insurance premium increases explained

3 April 2023

The amount you pay for insurance depends on a few things, such as the cover you choose, your sum insured, and any optional extras included in your policy. Your excess and any claims you make will also determine your insurance premium.

Why do insurance premiums go up?

When you renew your insurance policy, your insurance premium might go up – even if you haven’t made a claim or changed your circumstances. While there are several reasons why this may happen, there are also some things you can do to help cap costs.

How do insurance premiums work?
Insurance works by pooling together your funds with other customers who have a similar level of risk. When you need to make a claim, your insurer will use the pool to help you get back on your feet. To ensure there’s enough money to pay out future claims, insurers will use tools like probability calculations, claims histories, statistics, and risks (like fires and floods) to estimate how much should be in the pool.

What else influences insurance premiums?
There are many other factors that can affect insurance premiums each year. Building and trades costs have been rising for some time now, which makes repairs more expensive than before.

The cost of living has been going up too, which means it costs more to provide services and cover claims – resulting in a knock-on effect on the funds in the premium pool.

Government taxes can also impact insurance premiums.
If your circumstances change – like if you move house or add extra options to your policy – your premiums will also be adjusted to suit.
Will my insurance premium go up if I change my cover?
Remember that your insurance premium is based on the level of risk your insurer is covering. So if you change the car you drive or home you live in, your premiums will probably change too.
With second-hand car parts and prices rising each year, your car’s market value may have also gone up. Insurers have had to increase insurance premiums to reflect this.
Have you moved home recently or added something like accidental damage? These changes can impact your insurance premium, too.

How can I keep my insurance premium down?
Some steps to reduce your insurance premium include:

  • Increasing your excess: You’ll pay a lower premium but contribute more money if you make a claim. This is because you’ve increased your share of risk and reduced the amount of money the insurer needs to take from the pool. If you take this step, make sure you’re still comfortable paying the excess if you need to make a claim in the future.
  • Checking your policy: You may be paying for extra benefits you don’t need.

How do I know if I have the right level of cover?
As costs continue to rise, it’s a good idea to check you have the right amount of insurance cover.

What’s the market value of your car? How much would it cost to replace your household items today? If your home needs to be rebuilt or demolished, is it insured for the true cost to replace it?
At the same time, you don’t want to strip your insurance premium back so much that you don’t have the right level of cover if the unexpected happens.
Find your local Elders Insurance Agent and learn more about how we can help you with your insurance needs.
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