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How Car Insurance Premiums Are Calculated

Insurers consider a range of factors when determining your car insurance premium. Keep reading to learn some of the factors they could take into account.
How car insurance premiums are determined

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Some of the main factors used to determine your premium include:

Age and gender

Australian male drivers are over three times more likely than women drivers to have a fatal car accident3. In some states, younger male drivers are also statistically more likely to be in a fatal accident than older male drivers4. This means young male drivers will usually have higher insurance premiums, whereas women drivers will have lower premiums.

Car type

You can’t do much about your age, but you can choose your car wisely if you want a cheaper insurance premium. Some cars are associated with younger male drivers and street racing, while others simply cost more to repair or replace. Researching the cheapest cars to insure can help you keep insurance costs down.


Crime rates vary by suburb and may factor into your premium5. If you park your car in a suburb with a high crime rate, your premium will likely be higher. You can usually reduce your premium by keeping your car parked in a garage or under a carport overnight, regardless of where you live.

Driving history

The way you drive is a major factor in the cost of your insurance premium1. If you have a history of at-fault accidents, your premium will almost certainly be higher. Insurers consider this more important than some other factors so you may find keeping your car secure and driving less often won’t bring down your premium as much as expected.


Every time you drive on Australian roads, the chances of you having an accident slightly increase. Cars drive an average of 13,000 kilometres per year in Australia6. If you drive less than the average, you may find policies that reward you with a cheaper premium1. However, if you drive much more than the average, your premiums will likely be higher. Some insurers will limit your cover if you exceed the total kilometres you’ve advised, or increase your excess. Speak to an iSelect consultant to determine how a policy can work to your advantage.

Extras and excess

Each policy has potential extras that you can select, like windscreen cover and agreed value. Each extra you choose normally increases your premium, so be sure to choose only those that you need. Likewise, the level of excess you choose will increase or lower your premium. The more excess you pay, the lower your premium. Just make sure you keep your excess at an affordable level so you’re able to pay the excess in the unfortunate case of an accident.

types of car insurance australia

How can you reduce your premium?

Now that you know more about how insurers determine your policy premium, you can do everything possible to keep your premiums down.

1. If you haven’t yet bought a car, choose wisely so you’re not paying unnecessarily high premiums for a car with an insurance stigma

2. If you don’t need to drive, take public transport or carpool instead. Reducing your average kilometres per year can help reduce your insurance bill

3. Consider whether claiming in a minor accident is really necessary. It might be worth covering the cost of repairs yourself to avoid losing your good driving history

4. Keep your car secure by installing a car alarm and immobiliser and by keeping it parked in a garage overnight

5. Choose extras and excess carefully to avoid unnecessary hikes in your premium

Above all, be open and honest with your insurer to get a policy that meets your needs. In the case of an accident, insurers won’t cover damages if it’s found that information on file is incorrect. Update insurers with any changes for the same reason – you don’t want to find yourself unprotected when you really need it.

Looking for a better car insurance premium?

With over 19 million cars on the road7, it’s clear that car insurance is essential. You can never predict when something might go wrong, so your best bet is finding the policy right policy for you and your car at a great price.

Get a list of comparable policies from our range of providers today using our quick and easy comparison tool and make sure you’re getting a great deal on your car insurance policy.

1. https://www.moneysmart.gov.au/insurance/car-insurance
2. https://www.australia.gov.au/information-and-services/transport-and-regional/roads-and-road-transport/authorities
3. https://bitre.gov.au/publications/ongoing/files/Road_Trauma_Australia_2016_rev.pdf
4. http://www.dpti.sa.gov.au/__data/assets/pdf_file/0016/112327/Males_and_Females.pdf
5. https://www.crimestatistics.vic.gov.au/explore-crime-by-location
6. http://www.abs.gov.au/ausstats/abs@.nsf/mf/9208.0/
7. http://www.abs.gov.au/ausstats/abs@.nsf/PrimaryMainFeatures/9309.0?OpenDocument