Insurance premium pain: How to save money on the cost of cover

Insurance has been the fastest-growing household expense for two years and no let-up is in sight. Here’s how to save money on your policies.

Households hit by surging home, contents, car and health insurance premiums face even more hefty rises, but can potentially save hundreds of dollars per policy simply by taking a closer look at their cover.

The cost of insurance has climbed almost three times faster than Australia’s overall inflation in the past two years as extreme weather events, rising claims and higher building and repair costs flow through to premiums.

Insurance is one of the most complex household bills, and for this reason is often neglected, but money specialists say it can be one of the best to generate cost savings.

Australian Bureau of Statistics inflation figures show insurance prices leapt 30.5 per cent in the two years to June 30, compared with a 12 per cent rise in overall inflation.

Australian Bureau of Statistics inflation figures show insurance prices leapt 30.5 per cent in the two years to June 30, compared with a 12 per cent rise in overall inflation. In the past year alone average premiums rose 14 per cent.

The pain looks likely to continue. Last week insurer Suncorp – which operates many brands including AAMI, Apia, GIO, Bingle and Shannons – said it was feeling the sting of inflation and this would push premiums up in the “mid to high single digits” this year.

That’s well above Australia’s current inflation rate of 3.8 per cent.

A separate report last week by the Insurance Council of Australia noted that 12 per cent of households were under home insurance affordability stress, which is defined as the cost of cover being more than four weeks of household income.

“Growth in the cost of what insurers classify as secondary perils – floods, hail, storms, and bushfires – is a phenomenon we are seeing around the world, driven in large part by population growth in areas exposed to these risks such as southeast Queensland,” the council’s CEO, Andrew Hall, says in the report.

Mozo spokeswoman Rachel Wastell.

Comparison website Mozo spokeswoman Rachel Wastell said home insurance had seen the most painful premium increases in recent years, followed by car insurance.

Annual premium rises for these policies have topped 20 per cent for many people, and complaints have soared since the early 2020s.

“Home insurance prices are going up by an exorbitant amount because of the increasing occurrence of natural catastrophes, which is causing an increase in the number of claims, and in turn higher reinsurance costs,” Ms Wastell said.

“As the supply of building labour is tight, the cost of rebuilding is also becoming more expensive, increasing the cost of fulfilling these insurance claims.”

HOW TO FIGHT BACK

The number one tip from experts to save money on insurance costs is one of the simplest to do: check how much your premiums are rising, rather than let your policy renew automatically.

“It’s very likely that policyholders who have not compared policies in the past few years are paying a lot more than they need to for their insurance,” Ms Wastell said.

“Insurers like to provide hefty discounts for the first year of a policy, but that doesn’t mean you’ll get that discounted rate when you renew.

Check how much your premiums are rising, rather than let your policy renew automatically.

“Consumers often blindly renew their insurance policies, getting hit with a much higher premium after that first year, so it pays to check your renewal notice when you get it, and compare it side-by-side with the amount you paid in your first year.”

COMPARE QUOTES

People can explore insurance costs via insurers’ websites, online comparison sites or insurance brokers.

Ms Wastell recommends calling your insurer with a competitive quote from elsewhere.

“If they won’t match the quote, remember you can always change policies,” she said.

“You don’t need to stay longer than a year if you are not getting a good price.

“If the insured value of your car is going down and your insurance premiums are going up, that’s your sign to switch.”

Ms Wastell said some insurance companies were introducing new products and technologies to lower premiums.

“Things like smart monitors or sensors in your home or your car can reduce how much you pay for insurance, so it’s definitely worth looking into these new insurance companies,” she said.

PRIVATE HEALTH PAIN

Health insurance premiums have climbed an average 45 per cent over the past 10 years and 15 per cent over the past five years, said iSelect spokeswoman Sophie Ryan.

“This year, private health insurance prices increased by an average of 3.03 per cent on April 1,” Ms Ryan said.

She said factors influencing health insurance premiums differed from general insurance and could include rising health care costs, higher wages for medical staff, and increased equipment and technology expenses.

iSelect spokeswoman Sophie Ryan. Picture: Supplied

“The federal government must also approve any private health insurance premium increase.

“In 2024, some funds were asked to resubmit their initial price rise proposals, which would have resulted in a higher average annual price increase.”

Health insurance also differs in that millions of families on average or above-average incomes are penalised by the tax system if they do not have private hospital cover. Extra tax rates of at least 1 per cent are applied to their annual income, which in some cases costs them more than private health insurance would.

These tax rules do not apply to extras cover, which is optional, so cash-strapped households can consider cancelling health insurance extras to save money.

Ms Ryan said peoples’ current policies might no longer be their best option if their health needs or budget had changed.

“It’s important to review your policy regularly,” she said.

“Ask yourself what you need to be covered for and make sure you’re not paying for things you don’t need and that you’re covered for the things you do.”

NOVEL WAY TO SAVE

Carla Federico found a simple way to avoid paying car insurance: don’t own a car.

Instead, Ms Federico recently used car subscription service to test drive an electric vehicle for a few months and save on fees such as insurance, maintenance, registration and finance.

“The fact that everything was included, I wanted to use it and see how much I could save instead of buying a car,” the 25-year-old said.

Ms Federico now shares a vehicle with her retired mother and said rising insurance premiums and other household expenses were a big concern.

“Every time insurance comes up with your own car, it’s like ‘here we go, $1000 here, another $1000 there’,” she said.

Carla Federico recently used car subscription service to test drive an electric vehicle for a few months and save on fees such as insurance, maintenance, registration and finance.

The overall rise in living costs in recent years had been “shocking, to be honest”, Ms Federico said.

“We go to work, we are not getting paid much extra, and everything is going up that much more,” she said.

“It’s tough for everybody out there. No one’s going out any more.”

Carly Holdings CEO Chris Noone said car subscriptions started at $210 per week, included comprehensive insurance, and were generally cheaper than leasing or financing a car.

Carly Holdings CEO Chris Noone said car subscriptions were generally cheaper than leasing or financing a car. Picture: George Fetting

He said other ways people could save money on car insurance included choosing a higher excess to reduce the annual premium, paying annually instead of monthly, and keeping a clean driving record to lower their risk profile.

“Drive a car that is popular and easy to repair,” Mr Noone said.

“Exotic and lower-volume cars are more expensive to repair and may have less developed supply chains for replacement parts.”

Originally published as Insurance premium pain: How to save money on the cost of cover