My home insurance premium leapt to almost $7000. Here’s what I did

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Have you had the “pleasure” of opening your new house insurance premium envelope or email yet? “Panic” might be a more apt word.

Mine was up 27 per cent on last year. It was 9 per cent higher the previous year, and jumped 7 per cent the one before that. But that followed a 23 per cent leap in 2023.

Nicole Pedersen-McKinnon’s home insurance surged 27 per cent on the previous year. Guess what? That’s just about the norm. Premiums have increased 51 per cent across Australia over the past five years, says data analytics firm Finity.

The average home insurance premium rose to $2938 by October 2025, up from $1940 in 2020. And, yes, that’s far faster than inflation. Insurance costs have been one of the contributors to the rising consumer price index.

In my game, I know this. But my latest house and contents insurance premium, when it landed, shocked even me. It was nearly $7000.

The spike in premiums is linked to both natural disasters and catastrophe losses, and construction cost inflation. And let me say that I live regionally and many regions, exposed to flood, cyclone and bushfire, have seen higher increases.

Indeed, they are higher than capital city premiums, which range from $2000 to just over $4000, says Finity, although note that the figures are also nearly a year old now. Many premiums in the suburbs are also higher than those in the capitals.

So, getting back to my premium, after an hour on the phone to my insurer, these were the changes I made to my home and contents insurance.

I took off some not-very-expensive jewellery that I decided I didn’t want to pay to separately insure any more. I had long ago dropped any cover for older technology we had in the house – prices have come down but the premiums to insure it haven’t. Such extras, sometimes called specified personal values, are “exxy”.

I also reduced my overall contents cover by one-third to see the effect. And you know what? It didn’t make much difference to the premium, so I reinstated it to the original. The saving wasn’t worth what I was losing.

Motor burnout often only covers appliances that are up to 10 years old. I’ve lived here 13 years, so most motors – that have lasted – are older than that. But the saving from dropping the cover is small. Ask your insurer the cost, but I opted to keep cover anyway.

Now, unlike motor burnout, accident cover is quite likely an expensive component of your cover. But this could pay for itself over and over in the event of a little accident doing a lot of damage, especially if you have kids like I do.

It’s vital that your insurer has all your correct building material and property specifications. It’s also key to tell them each year about any updates or renovations you have made, or they won’t be covered. And yes, that will probably add to the insurance cost.

You can tweak things like the standard of the rebuild, but if the worst happened, you don’t want to end up with less.

And whatever you do, consider taking out whatever “guaranteed rebuild” or “safety net” option your insurer offers. This ensures that in the event construction prices leap, say because of a natural disaster, you will be fine – it’s their responsibility to cover the cost.

And be aware that ASIC has recently warned that you are at risk of being short-changed if you instead opt for a cash settlement, which are on the increase, with 63 per cent of final home insurance claims now including an element of cash.

You need to be sure a cash settlement is sufficient for what you need. And, in fact, the only way to make sure of this is if the insurer manages the repairs or rebuild directly.

I had reduced my excess to $1000 last year, from $2000 the year before, so I had wriggle room to go back to $2000.

I scoffed at the suggestion, though, repeated by the consultant again this year, to go to an excess of $5000 to slash about $700 off my premium. I want insurance to work for me when I need it, rather than leaving me significantly out of pocket.

On this point, I also kept the tradie-to-your-door service my insurer offers in an emergency. That seems worth it at any cost.

My saving? All the changes above certainly didn’t cancel this year’s price hike. And my insurer, annoyingly, wouldn’t budge on any kind of loyalty discount. But the process and levers I pulled did shave nearly $500 off my bill. And that’s something in today’s tight money world.

Nicole Pedersen-McKinnon is author of How to Get Mortgage-Free Like Me, available at nicolessmartmoney.com. Follow her on Facebook, X and Instagram.

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