What impacts my home and/or contents premium?
When insuring your home and/or contents, we ask several questions to help you determine the cover you need and the associated premium. Some of the key pieces of information that impact your premium are listed below.
Sum insured
The sum insured is the most you can claim for any one event unless otherwise stated in your relevant policy document. Often, the extra bit of cover you could need, may not significantly increase your premium. You should make sure it’s up-to-date and will sufficiently cover the rebuild of your home and/or replacement of your contents.
Location
Some areas are more prone to natural disasters or severe weather events and therefore, location can impact premiums. We’re experiencing increased storms and flooding, which have a direct impact on claims and insurance costs. This means insurers need to be disciplined around pricing the properties and areas they cover sustainably.
Certain areas with higher instances of theft and/or vandalism can also have an impact on premiums.
Building materials
The materials used to build a home will affect the premium charged, particularly as they’re what protects a home and your contents from the outside elements.
Year of construction
The year your property was built could influence how much premium you pay. For example, certain types of construction methods and materials have been shown to impact the likelihood of a claim occurring.
What impacts my car premium?
When insuring your car, we ask several questions to help you determine the cover you need and the associated premium. Some of the key pieces of information that impact your premium are listed below.
Agreed value
The amount your vehicle is insured for affects your premium. Your agreed value will usually be adjusted every year at renewal to account for depreciation, in line with the market.
Type of vehicle
The type of car you own can have a significant impact on your premium, because the cost and availability of replacement parts can vary based on a vehicle’s make, model and age.
Location
Areas with higher incidences of theft and vandalism could see higher premiums, and more populated areas mean more traffic and an increased likelihood of damage occurring. This is monitored by analysing our claims data.
Age of driver
A driver’s age and experience can affect their likelihood of having an accident or claim. For example, we generally see more experienced drivers with fewer accidents. This is monitored by analysing our claims data.
What influences premium?
As an insurer we have a responsibility to maintain a level of capital to meet our customers’ needs in the event of losses and claims. Throughout this process, we always aim to ensure premiums fairly reflect the risk and the cover provided for our customers. This means striking a balance between pricing policies for specific risk, versus pooling that risk and spreading the cost to make insurance more affordable for all customers across the board.
We are continually checking our pricing against factors like the number and types of claims we experience and changes to the cost of running our business. This means that each year your premium can change, even if your personal circumstances haven’t.
Recently, increases to inflation and reinsurance costs, supply chain constraints and the rising cost of materials have impacted premiums across the insurance industry. We’re seeing more frequent and severe weather events, including storms and flooding, which have a direct impact on claims and insurance costs. As a responsible insurer, it’s very important that we price the risk we take on fairly and accurately – so we can be here for our customers when they need us.
Claims
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A premium may change if we receive more claims than planned for or these cost more than expected (for example, the cost of materials or parts increases). We also try to anticipate our future claims costs based on data from our past claims experience. In addition, we may use third party data to try to predict what claims may cost us for certain types of damage e.g. severe weather events such as storms and floods. For some policies, your own claims history can also affect your future premium.
Taxes & Levies
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Any applicable taxes and levies are applied including GST, Earthquake Commission and Fire & Emergency levies, which we collect on behalf of the government. The Earthquake Commission recently increased the maximum cover they provide for natural disaster claims on residential buildings. As a result, the earthquake levy has also increased. Please visit our levies page for more information.
Reinsurance
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Part of the premium we collect from our customers goes towards paying our own insurance premium to reinsurance providers. This is additional cover we purchase to protect us against exposure to large scale events such as storms, floods and earthquakes. This helps us maintain our ability to pay claims. As the cost of our reinsurance changes, so too could your insurance premium.
Expenses & Profit
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Like any business, we have expenses and operating costs that enable us to service our customers. We invest in the technology and products that we believe will enhance our customer experience. We also need to make a profit to ensure we can continue running our business year after year, and this can vary significantly depending on large scale events.
Understanding your notices and premiums
You’ll find answers for many of your questions here. If you have a more specific question or want more detail, please contact us.
Concerned about the cost of your insurance?
Here are some ways to save on your premium
Check your contents sum insured – use the online calculator on our website (provided by ‘Sum Insured Pty Ltd’) to check everything is up-to-date and that the cover you have would be enough to replace all your contents if you lost everything. For example, if you have downsized since setting up your policy, you may be paying for more cover than necessary. It’s also important your sum insured is updated when you buy new stuff or upgrade your belongings (especially expensive items like a new TV or sofa) so you’re not caught short in the event you need to claim. Often, the extra bit of cover you could need might not significantly increase your premium.
Review your excess – depending on what you think is manageable for your budget, you may want to review your excess. There are different excess options available, in case you need to make a claim, and generally the larger the excess, the smaller the premium. Remember, you’ll need to pay this amount if you make a claim so it should still be affordable. You should also take into account any additional excesses that may apply.
Check your home sum insured – use our online calculator to check it’s up-to-date and will sufficiently cover the rebuild of your home. For more information, check out our sum insured page.
Consider how you pay – you can choose to pay your premium annually or spread the cost by fortnightly or monthly direct debit. You’ll pay less if you pay one annual lump sum.
Review your benefits – you’ll find your optional benefits listed on your policy schedule or on the Policy Summary page in your My AA Insurance account. For example;
If you could use another vehicle while yours is being repaired and wouldn’t need us to provide a rental car, you may wish to remove the optional rental cover benefit from your Comprehensive Car Insurance Policy. Removing this benefit saves $50 (Inc. GST) per year.
You may decide you no longer want or need the optional excess-free glass cover benefit for your Home Insurance Policy. Removing this benefit saves $69 (Inc. GST) per year.