Why are my insurance premiums always going up?

It’s almost become an annual event: waiting to learn how much your insurance premiums have increased by.

Many of us have untold numbers of insurance policies, including car, home, contents, life, TPD, pet, business, the list goes on and on.

And every one of these seems to have a steady year-on-year premium increase that’s contributing to the ever-growing cost of living, while wage growth remains essentially stagnant.

So why do insurance premiums increase every year? It’s a pretty simple answer. Every time someone makes a claim, the insurer pays out, and given insurers are businesses, they want to maintain and grow their profits, so to cover the cost of payouts, they have to increase their premiums.

As an example, here’s MLC’s rate increases for this year:

• Death cover (stepped and level premiums): up 3.5%.
• TPD: up 3.0%.
• TPD – Additional Rate changes: up 15%.
• Critical Illness: up 15%.
• Income protection (stepped and level premiums): up between 5-35%.

One way to minimise the impost of insurance costs is to hold the policies that you can through your superannuation, for example life insurance and TPD. This is what we advise many of our clients to do.

But if your insurance premiums have become such a burden that you’re starting to miss payments and considering cancelling the policy, there are a few steps you can take to ease the squeeze.

• Increase your waiting period: Extending your waiting period can result in a significant premium reduction. For example, a policy with a 180-day waiting period will be much more affordable than one with a 30-day waiting period.
• Reduce your benefit period: You can potentially save a lot on premiums when reducing your benefit period, for example, to 5 years, instead of up until age 65.
• Lower your benefit amount: Decrease the level of income provided if your premiums have become unaffordable.