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Insurance costs are soaring: 3 ways to save right now

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Here's why inflation is leading to higher insurance bills – and what you can do about it.

New ABS figures show that insurance premiums went up by 4.1% nationally over the past 12 months.

Overall, inflation went up from 5.1% to 6.1% in the last quarter – the highest inflation rate in 3 decades.

Don Shields, owner of Geelong Insurance Brokers, estimated that home insurance premiums were up around 15-20%, while vehicle premiums are increasing about 10-15%, over 12 months.

Even before the recent economic strife, Finder analysis has found that the cost of pet insurance had spiked by 46% over the past 5 years.

What's behind the insurance price rises?

There are "lots of factors" behind an increase in prices, according to Shields, an insurance expert with almost 4 decades of experience.

Shields said: "Each year insurance companies pay more in claims than they collect in premiums."

"The difference, along with a dividend for shareholders, is usually made up from investments, which are at historically low rates of return. Insurance companies, therefore, have no option but to increase premiums."

But, according to Shields, poor investments aren't the only thing to blame:

  • High claim costs. It costs more to repair vehicles after a car accident and more to rebuild homes, for example, after a flood. Supply chain and labour issues are behind these rises. The cost of steel and timber has spiked over the last 12 months. A shortage in qualified tradies is putting further pressure on construction costs.
  • Reinsurance. Insurers buy insurance themselves to prevent going bust if they have to pay out multiple claims after a disaster. The providers of this insurance – called reinsurance – are being hit by more catastrophes worldwide. As reinsurers increase their costs, these are passed on to insurers.

Alex Holderness

"Prices have been rising and will continue to rise for natural disaster insurance, such as for floods and fires.

"In terms of floods, the most likely thing to happen is that insurance is going to become unaffordable for many Australians," Paula Jarzabkowski, Professor of Strategic Management at The University of Queensland, told Finder.

Where can I find insurance savings?

Start by reviewing the insurances you currently hold. Could you switch or drop any of these based on your circumstances? For example, is your phone warranty offering value for money? What about your life insurance inside super?

If you're planning a trip, comprehensive travel insurance is always a great idea; however, it's good to know a handful of credit cards now offer travel insurance with COVID benefits included.

Boosting security features in your home can lower home insurance costs. Installing a burglar alarm system, deadlocks and keyed window locks can all help.

To make car insurance savings, consider installing a kill switch – a strong option particularly if you can't park your vehicle in a secure garage overnight.

Here are 3 other ways you could directly save on your premiums:

  • Compare multiple quotes. For car or home insurance, loyalty rarely pays and the best car insurance for you one year can be different the next. See how one consumer saved more than $1,400 by comparing a range of providers.
  • Review your policy excess. You can typically find a premium saving by choosing a higher excess. Keep in mind, that you'll pay more to make a claim.
  • Pay annually. Many insurers will charge more if you pay monthly. Paying once a year can be a good way to save, as long as you can afford the upfront cost of your premium.

For more ways to tackle the rising cost of living, read about 50 money-saving tips.

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