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Car insurance increase the strongest in over twenty years

Due to the rising cost of living and other environmental factors, insurance across the board has risen, with car insurance being one of them.

March 2024 Inflation data released by the Australian Bureau of Statistics revealed that insurance prices in Australia increased by 16.4 per cent annually, which is the “strongest annual rise since 2001”.

An increase in “natural disasters and claims costs” is responsible for the rise in premiums for all insurance types including home and contents insurance and car insurance.

Car insurance has been the most discussed expense amongst consumers, many of whom have seen their quotes double and even triple in twelve months.

Even if you have an impeccable driving record and there haven’t been any changes to your circumstances, you might receive a higher renewal rate for your car insurance this year.

Why has car insurance increased?

Essentially, car insurance costs have increased as car prices and repair costs have gone up. In conjunction with this, supply chain issues have also impacted repair labour costs and the price of car parts.

Due to the complexity of modern cars, minor dents that might have been simple to repair once-upon-a-time, now need to be fixed and tested to ensure features like sensors are still working.

Inflation has also contributed to the increase in repair costs which means that insurers must cover a higher cost each time customers make a claim.

People are driving now more than ever, which, naturally, will increase the possibility of an accident. Due to the changing environmental climate, there’s a higher risk of encountering natural disasters like floods or bushfires, which contributes to the increase in insurance costs.

Average cost of car insurance in Australia

According to Canstar, a comparison site, the average cost of comprehensive car insurance in Australia is $2184 for women under the age of 25 and $2437 for men of the same age group. For those aged 25-29, the average is $1733, for those aged 30-49 it’s $1312 and for those over 50 it’s $1006.

Interestingly, for those looking at purchasing an electric vehicle (EV), there can be a 40.1 per cent difference between quotes for comprehensive car insurance when compared to petrol cars.

Factors contributing to the higher premiums for EVs include the complex components that may cost more to repair or replace and a general lack of specialists that can complete such repairs.

How can I pay less for my car insurance?

Change insurance providers

If it’s time to renew your car insurance and you notice a significant increase, shop around and get quotes from other providers.

If you find a provider that gives you a lower quote for the same cover, your options include taking them up on their offer or taking it to your current provider to see if they will match it.

Data released by Roy Morgan revealed that in the 12 months to October 2023, there were approximately 2.6 million car insurance policies that were switched to another provider.

Go incognito

It’s not uncommon for insurers to charge existing customers a higher premium compared to new customers.

Using the same parameters you used for your current policy, get a quote from your insurer as if you’re a new customer to check for a difference. If you find that the quote for a new customer is cheaper than your current premium, call your provider to have your renewal notice lowered.

Drive less and park your car safely

A clean driving record will help to keep your premium low much like leaving your car at home and using it less frequently.

Parking your car in a secure area such as a garage is safer than parking it on the street, thus impacting your premium. Some websites connect you to people who are hiring out their car spots, however, the cost of renting this out may cancel out any potential savings in your car insurance.

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Don’t include younger drivers

Drivers under the age of 25 will increase your premium significantly. If you have younger drivers in your family, confine them to driving one car so you don’t need to cover them across multiple cars and policies.

Adjust your excess

If your premium has increased and you drive short distances or less frequently, consider increasing your excess to decrease your premium.

Naturally, this does mean that your upfront cost will be higher should you get into an accident, so it’s worth calculating that risk compared to a cheaper premium.

Get a quote before purchasing a car

Some types of cars such as EVs, utes and luxury cars cost more to insure compared to other models.

If you’re considering purchasing such a car, get a quote before buying a particular model.

Insure for market value rather than agreed value

Opting to insure your car for its market value rather than the market value will bring down your premium, however, there is a risk of receiving a smaller payout in the event your car is written off.

The market value will cover you for the reasonable replacement cost based on what your car is worth in the market.

When you insure your car for an agreed value, you’ll be covered for the amount you and your insurer agree to regardless of depreciation.

The market value will be cheaper on your premium, but oftentimes the market value of your car will generally be less than what you initially paid.

Pay upfront

Some insurers will give you a discount for paying annually rather than monthly. However, if you feel that paying a large sum upfront is out of your budget, consider switching to monthly payments for better manageability.

Pick a budget provider

If your car insurance is with a major provider, consider switching to a smaller provider as they might be able to give you more competitive pricing.

For younger drivers, it’s always worth comparing the pros and cons of the major and smaller providers to make sure you’re getting the most bang for your buck.

Eliminate comprehensive car insurance

If you’re paying more to insure a fifteen-year-old car, consider opting for third-party cover.

Cars will get to a point where the premium hasn’t decreased enough to justify keeping it, especially for older cars.

If this is the case, perhaps having third-party insurance will suffice rather than paying a higher premium for an older car.

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