Understanding your home insurance premium

Last updated 16 May, 2024
Your home insurance premium is likely to change each year and you may wonder why. We want to help you understand your premium. This guide gives you the facts: how your premium works, how it’s calculated, and why it can change.
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How your Home Insurance premium works

The money you pay insurers to insure your property is called a premium. By paying your premium, you’re contributing towards a shared pool of funds that helps to pay claims. It’s also used to pay for expenses - such as staff, office space and other things that keep the insurer’s business going. 

Insurers consider each policyholder’s circumstances to determine their likelihood of making a claim. That’s how they make sure each policyholder’s premium makes a fair contribution to the shared pool of funds. 

Calculating your premium

Insurers base your premium on your circumstances, the cover you’ve chosen, your likelihood of making a claim, and the potential cost of the claim. That’s how they make sure each policyholder’s premium reflects what they believe is the likelihood to make a claim.

To work out how much it will cost to provide insurance for your home or contents, or both, Allianz uses various data sources. We’ll also ask you specific questions. Your answers are important, and all customers have a duty to not make a misrepresentation when answering our questions.

To calculate your premium, insurers use a number of risk factors to determine your likelihood of making a claim. Some of the key risk factors Allianz uses include:

The address of your house

The address of your house plays a significant role in shaping home insurance premiums. Insurers consider a number of potential risks and extreme weather events such as cyclones, floods, or bushfires.

How your property is occupied

Occupancy is another key piece of information for home insurance. Different occupancy types, such as owner occupiers, landlords or renters, carry different levels of cover, risk and potential claims.

Your claims history

Claims statistics show that home insurance customers who have had a claim are more likely to have another claim at some stage.

When your home was built

The potential risk of a claim increases as a building gets older. As these older buildings are more susceptible to structural, electrical, and plumbing issues, this is reflected in premiums of some homes. This is only a rating factor for home insurance buildings cover. 

The construction materials used

The materials used to build your home can impact the risk profile of the property. For example, they can indicate fire risk and how much it would cost to replace.

Your sum insured

Your sum insured is the most Allianz will pay if you need to make a claim for an insured event, such as a fire1. Allianz bases your sum insured on your estimate of the cost to replace your home or contents, or both, depending on your policy.

The age of the oldest person insured

Allianz’s claims experience shows that the age of the oldest policy holder influences the likelihood of a claim being made against the home insurance policy.
For more information, see the Home and Contents Insurance PED Guide (PDF, 157 KB) and Landlord Insurance PED Guide (PDF, 280 KB). 

Remember, it’s important to give insurers accurate information about your property to make sure your insurance cover is appropriate for your home.

Why your Home Insurance premium may change

When you update your home insurance policy, your premium may change. For example, increasing your cover because you’ve purchased a new TV or listing expensive jewellery on your policy will usually increase your sum insured. 

Your sum insured is the maximum amount your policy will pay for a covered loss. When you increase this amount, your cover and premium also increase to reflect the higher level of cover.

Other factors beyond your control may also affect your home insurance premium including:

The likelihood of future weather events

In recent years, Australia has experienced more frequent extreme weather events like bushfires, storms, cyclones, and floods, impacting many communities. This can lead to an increase in the costs of providing much needed support and claims services to customers. 

Living in an area that’s prone to flood, bushfires, or cyclones may result in higher insurance premiums. This is because the risk of these natural disasters is greater. 

Increases in building costs

When building and construction costs increase due to reasons such as supply chain disruptions, skilled labour shortages, or increases in cost of building materials, the cost of an average home insurance claim also increases. This can mean insurers have to charge more premium to ensure they can cover these claims costs.

More tech gadgets

We own more technology than ever before, such as smart watches, laptops and mobile phones. This means more opportunities for our expensive devices to get broken, lost or stolen. Repair or replacement costs can be expensive, which impacts the cost of contents insurance claims.

Interested in motor insurance premiums?

Find out more about motor insurance premiums and some of the factors that affect cost.
VIEW MOTOR INSURANCE GUIDE

*Conditions apply

  1. 72-hour exclusion period may apply – Home
    We don’t provide cover for any loss of or damage to your property caused by cyclone, flood, grassfires, and bushfires, during the first 72 hours after you first purchase a policy or increase your cover under an existing policy. For full details of conditions and exclusions please refer to the relevant PDS. 

Disclaimer

This article has been prepared by Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL 234708 ("Allianz"). In some cases, information has been provided to us by third parties and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way.