Like most car owners in Australia, you may have already set aside some money to pay for your annual auto insurance cost. Those costs don’t change much year-to-year, but there may come a time when you discover a massive increase in your premiums that come out of nowhere!
What gives?
Well, car insurance can be a tricky thing, and you’d be forgiven for seeing it as a creature with a mind of its own. For that reason and more, you must understand what it is, how it works, and what could cause your premiums to go up at any point in time.
This article is going to help you strengthen your knowledge about car insurance. In the following sections, we’re going to look at some of the reasons behind a sudden car insurance increase. Then, we’ll even take a brief look at what you can do to help your auto insurance decrease instead.
Should Car Insurance Decrease Every Year?
Yes, your car insurance costs can decrease every year, and it usually happens if you’re a safe driver.
Remember: car insurance is all about risk. When the risks that you face on the road are lower, then the amount you pay for insurance also decreases accordingly.
There are two sides to that equation: the local driving risks (something that’s beyond your control) and your No-Claim Discount (something well within your control).
Local Driving Risks
Insurance companies consider the degree of risk your vehicle faces, based on where you are in Australia. For example, if you're in an area with a high risk of car accidents, natural disasters, or vehicle thefts, any of these situations may very well cause your insurance costs to go up.
However, if your area sees a decrease in those risks, you could see a slight reduction in your annual insurance premiums.
No-Claim Discount
If you're a safe driver who never gets into accidents and never files an insurance claim, you're usually eligible for what's known as a 'No Claim Discount. Some insurance companies refer to it by a different name, such as 'Safe Driver Reward', but they work the same way.
The longer you go without any claims, the higher the discount will be, though the insurance may put a cap on the maximum discount you can enjoy.
Why Did My Auto Insurance Premium Increase?
There are several reasons why an insurance company may increase your auto insurance premiums. Here are a few common reasons:
Increase in Risk
The business of insurance is the business of risk. When the insured item, i.e. your car, faces a higher risk than it did the year before, your auto insurance cost will reflect that increased risk accordingly.
An increase in local car thefts or even natural disasters is an example of increased risk to your vehicle. Besides that, there may be more vehicles on the road in your state than the year before, plus more frequent cases of road accidents as well.
All insurance companies are continually evaluating these risks, and that’s why your auto insurance premium may increase one year to the next.
Changes in Your Personal Situation
Any change in your personal circumstance that might affect your car can also cause an increase in insurance costs. For example, you may take on a new job that requires driving all across Australia non-stop. Or, you may need to take your vehicle to more off-road locations with unpaved roads. Those changes reflect an increase in risk.
The same is also true if you were to move to a place where your car parking is less secure, e.g. your new daily parking spot is on the side of a street with no shelter or gates.
Economic Changes
Sometimes, an increase in your car insurance premiums might have nothing to do with risks at all. Changes in economic conditions like inflation or growth in operating costs for the insurance company can drive up costs for the customer (i.e. you!).
How Do Accidents Affect Auto Insurance Costs?
One of the quickest and surest ways of increasing your auto insurance cost is getting into an accident. That’s especially true if the accident is your fault, as it may show the insurance company that you have unsafe driving habits.
Sadly, the same can also happen even if the accident wasn’t your fault. You see, a car accident can decrease the vehicle’s overall safety. Even if you do get the car fixed, the car’s frame might not be able to take a future collision as well as it did the first time. In simple terms, that car is already compromised after an accident, and your premiums will never be as cheap as when the vehicle was brand new.
How Do I Get My Car Insurance Lowered?
The cost of car insurance isn’t entirely out of your control. There are many steps that you can take to lower the premiums you pay year after year. Here are just a few of them:
Review Your Insurance Coverage
We may get a little carried away when we first purchase auto insurance. At first, it may seem sensible to get as much coverage as we can afford. Truthfully, that's not always the case.
When the time comes to renew your auto insurance, it would be a good idea to review the coverage. You may find some parts of your policy unnecessary, and you can remove them from your policy to reduce your premiums.
Only File A Claim When Absolutely Necessary
One of the best ways to reduce insurance costs is only to file a claim when necessary. So, if there’s minor damage to your vehicle that you can afford to pay for out-of-pocket, it’s best to do so that way.
Remember: the longer you go without filing an insurance claim, the higher your no-claim bonus.
Limit the Number of People You Allow to Drive Your Car
Lastly, you should reduce the number of people allowed to drive your car. There are two parts to this.
Firstly, insurance policies typically require you to register any additional drivers on the policy, such as your spouse or family members. That can increase the premium.
Second, you should be prudent about who you allow to drive your car. After all, you're the one who has to foot the bill if anything goes wrong.
Learn More to Become a Better Car Owner
To learn more about auto insurance and other topics important to the Australian driver, be sure to check the blog at Carpart.com.au often. It’s how you stay in-the-know when it comes to your vehicle.
It’s the same website where you may locate an auto part by simply requesting for it. It saves you the time and effort spent in searching for a hard-to-find- car part, which can be tedious. Try requesting a part now and start receiving the best price quotes! This feature is free to use!
By Ray Hasbollah