Factors affecting your car insurance premium

By Dan Hatch

4 minutes

03 October 2019

Girl in car smiling and reversing

Car insurance premiums are as individual as the person holding the policy, which can sometimes make the way they’re calculated seem a bit of a mystery.

You and your next-door neighbour could drive the same make and model of car, for example, and pay entirely different premiums.

That’s because there are a number of factors that go into calculating what your premium will be, including fixed pieces of information about you and your life and some decisions you’ve made about the kind of policy you want to take out.

Before we get on to how you can save on your premium, here are some of those “fixed” pieces of information insurers typically rely on:

  • Your risk location: This is usually where you live, but it can also refer to where the vehicle is kept and how it is stored (in a garage or on the street, for example)
  • Make and model of the vehicle: The age and market value of your vehicle are taken into consideration
  • Your age: Insurance companies have a lot of data they can use to calculate the risk of you, as a policyholder, having an accident. Your age (and your level of driving experience) are factors that contribute to this risk and, therefore, the calculation of your premium
  • Whether or not your car is financed: In general, if your car is under finance (i.e you are paying off a loan on it) your premium will be more expensive than if you owned the car outright. That’s because while the car is in your name, the technical owner is whoever is lending you the money – which makes a lot of additional administration for the insurer if the vehicle is a total loss or has to be replaced.

How is my car insurance premium calculated?

Every insurance company has its own pricing algorithm that considers a mix of factors, including, but not limited to, the ones listed above.

When you take out a policy, your insurer asks you quite a few questions about your life and personal situation and the vehicle you want to insure. This information is used to conduct a risk assessment on you as an individual driver. The outcome of that risk assessment is what’s used to determine your premium.

Are there ways to save on my car insurance premium?

Many of the factors that go into calculating your car insurance premium are things you cannot change, but that doesn’t mean there aren’t ways to reduce your premium.

A way to reduce your premium is through the excess you agree to when you take out the policy.

An excess is an amount of money you pay to the insurer when you make a claim and the more you are willing to pay in excess, the lower your premium will be. Similarly, if you want to pay a lower excess in the event of an accident, your premiums will be higher.

This is a really good option for people who feel they are a safe driver and less likely to have an accident than other motorists. Say, for example, a standard excess is $600. You could bring your insurance premium down if you were happy to pay a $1,000 excess in the event you had to make a claim.

Whenever you’re taking out a policy, it’s always good to ask your insurer what impact a higher excess will have on your premiums, because it can really make a difference.

If my circumstances change will it affect my policy?


Whenever there is a change in any of the kinds of circumstances your insurer asked you questions about when you took out your policy, you should let your insurer know.

There are two reasons for this:

  • It could change your premium
  • If you don’t tell your insurer, you’re putting the validity of your policy at risk.

Here are some common changes policyholders sometimes forget to tell their insurer about, but need to:

  • Your legal name
  • Nominated driver
  • Address
  • A new vehicle
  • You’ve paid off your loan (the vehicle is no longer under finance)
  • You’ve added off-market accessories or made other additions to your vehicle
  • You’re letting a young driver use your vehicle (for example, driving lessons).

You should let your insurer know of any changes in circumstance within 14 days. It’s worth noting that if you haven’t provided that information (or if you’ve provided false information) your claim may be denied.

Surprisingly, people often forget to change their car insurance policy when they move house. If you’re changing your home insurance policy, it’s time to update your car insurance, too!

What you can do to get your vehicle well covered

Review your current car insurance and check whether your information is up to date. Consider whether it’s time to change your excess and how that might affect your premium. HBF has several car insurance products that could give you peace of mind, whether you’re on the road a little or a lot. If it’s time to make a change, get in touch with your HBF car insurance team.

Want to get your car well covered?

We make it easy to compare prices, browse plans and get a quote for car insurance.

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HBF Car Insurance is issued by Insurance Australia Limited ABN 11 000 016 722 AFSL 227681 (IAL), trading as CGU Insurance. For full policy details please refer to the Product Disclosure Statement (PDS) which can be obtained at [website]. This is general advice only and does not take into account your personal circumstances. You should consider the PDS and your personal circumstances in deciding whether to buy or hold these products. HBF Health Limited ABN 11 126 884 786 AR No. 406073 (HBF Health), is an authorised representative of IAL. Please read the Financial Services Guide (FSG) before applying for an HBF General Insurance product.

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