Premium pain? How to combat rising insurance prices and stay covered

Real Money, a free weekly newsletter giving expert tips on how to save, invest and make the most of your money, is sent every Sunday. You’re reading an excerpt − sign up to get the whole newsletter in your inbox.

We’ve all been there: some sort of minor disaster occurs – a medical emergency or a burst pipe flooding your apartment – and you’re slugged with the bill, gasping in shock about how something can really cost that much.

Then, a moment of calm, as you realise it’ll be covered by your insurance. All those years of paying those expensive premiums have finally paid off. It all makes sense now.

Insurance can sometimes be seen as a necessary evil, but there are some things you can do to save money on your premiums.Credit: Aresna Villanueva

But for some of us, those moments are few and far between, leaving us generally grumpy about paying those expensive insurance bills but knowing that we have to, just in case. As they say, it’s better to be safe than sorry.

What’s the problem?

While insurance has never really been cheap, it has become increasingly expensive over the past 12 months thanks to – you guessed it – rising interest rates and inflation, along with a spate of various natural disasters. Premiums for common insurance such as home and motor cover have risen by about 10 per cent across the board – by 20 per cent in some scenarios – and are expected to rise by another 10 per cent this year. Health insurers, which have been putting off raising their premiums to provide some financial relief to customers, are all expected to raise their premiums by October, seeing health insurance costs rise by an average of 2.9 per cent.

A survey from Choice last month showed 87 per cent of Australians reported their home and contents insurance premiums going up, with two-thirds saying the increase was more than they expected. A whopping 40 per cent of respondents said they were not given an explanation for the increase.

What you can do about it

In that same survey, 88 per cent of people said they stayed with the same insurer despite being told their premiums were increasing, which implies many of us are being stung for our loyalty to a certain company or brand, and I can guarantee those insurers do not feel the same loyalty to you. That brings us to our first (and most important) tip:

• Shop around: Sophie Ryan, spokesperson for insurance comparison service iSelect, says some people believe they are rewarded by showing loyalty to an insurer, which is often not the case. “In fact, often providers offer better rates/premiums to attract new customers than what are available to existing customers,” Ryan says. If you’ve been with your provider – for any kind of insurance – for a while, it’s worth doing some research to see what else is out there. As they say, there’s plenty of fish in the sea.

• Assess your excess: Your excess is the amount you have to pay, no matter what, if you make a claim on your policy. Often excesses are set around the $500 to $700 mark, depending on the policy, but by increasing your excess, you can often significantly lower your premiums. For example, changing the excess from a basic comprehensive car insurance policy from $700 to $1100 can save you upwards of $250 a year. This can come with greater risks, warns the Insurance Council of Australia, as you’ll have to pay a higher amount upfront in the event of a claim, so only do it if you have the capacity.

• Review your policies: With the seemingly endless number of things you need insurance for these days, the number of policies we have can start to feel a bit unwieldy. It’s worth sitting down, Ryan says, and going through each policy you have and assessing if it’s right for you. “Our needs and circumstances change over time. When it comes to insurance (such as health, home and/or contents or car insurance), regularly ask yourself what you need to be covered for and if your current policy or plan stacks up,” she says. “You could be paying for things you don’t need, and not covered for things you do.” It’s also worth noting many of us are covered for things such as loss of income, death, and trauma insurance via our super funds, so make sure you’re not doubling up.

• Go annual: An easy one but a good one – paying premiums annually rather than monthly can save you hundreds of dollars.

• De-risk your home: Insurers will often offer you discounts if you take steps to improve the security of your home or car. This can include installing alarm systems, lockable windows or deadlocked doors. These are often relatively low-cost to install and can reduce your premiums, with the added bonus of making your house more secure. Win-win!

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.