With a bit of effort, you can slash the cost of protecting your home and possessions!
One thing I never, ever do is automatically renew insurance policies when renewal notices arrive.
As a 15-year veteran of the insurance industry, I know all-too-well that insurers always put up premiums at renewal. This happens even when policyholders haven't claimed and their circumstances haven't changed.
In fact, over the past two years, the cost of insuring a home and its contents has risen by a fifth (20%), according to the AA's most recent British Insurance Premium Index. This is partly due to higher payouts for severe weather, plus steep increases in fraud.
Pruning my premiums
Three weeks ago, my home insurance provider invited me to renew my contents insurance. The inevitable premium increase came as no surprise, as insurance premiums for car insurance and home insurance have been creeping up for years.
Also, as I'd moved house in April, I fully expected to be hit with a higher premium. Even so, I was stunned to learn that my premium was set to rise by nearly half, up 49%!
Of course, no way was I going to pay nearly 1½ times as much for my 2011/12 policy, so I studiously shopped around. After searching online, I bought my contents insurance from a rival company, slashing an impressive 42% from my renewal quote. Not bad, eh?
Don't be lazy or loyal
Here are six ways that you, too, can prune your insurance premiums:
1. Always shop around
I know I say this every time, but it really is the best approach. Nevertheless, some people stick with a single insurer for years, not bothering to spend 30 minutes seeking out a cheaper deal.
One lovemoney.com reader wrote to me some time ago, regretting his decision not to find competitive quotes for his home insurance. For nearly 20 years, he'd renewed his policy with his mortgage lender -- always the worst company to buy insurance from. When he eventually shopped around and got a quote for £100, he was paying nearly £400 a year to his crafty lender. Ouch!
So, learn his lesson and don't let your existing insurer (or mortgage lender) pick your pockets. Instead, look for quality quotes online.
2. Barter for a better deal
When my renewal notice arrives, I call my insurer to check my premium for the previous year. This is something that is never shown on renewal documents. At this point, I challenge my insurer to lower its quote or price-match my best offer found elsewhere.
[SPOTLIGHT]It's remarkable how often this approach lowers your premium.
3. Increase your excess
All home insurance policies include excesses, which are sums that policyholders have to cough up towards the cost of a claim. Typically, a contents insurance policy will have, say, a £50 excess per claim.
One simple way to keep insurance costs down is to add a voluntary excess onto this policy excess. By adding, say, £50 to £1,000 to the standard excess, you can make a decent dent in your premium. This is because a larger excess acts as a deterrent against making small claims.
4. Avoid making trivial claims
The best way to bump up your premium is to make a claim. Just watch your quote rocket! On the other hand, not having any previous claims can trim a fifth (20%) from your home insurance premium.
Hence, in some circumstances, it's better to pay the cost yourself, rather than make a claim and see your premium soar by 25% or more. Personally, I view my contents insurance as 'catastrophe cover'. Thus, I probably wouldn't claim for less than, say, £500.
Otherwise, the long-term cost might outweigh the short-term gain from the claim.
5. Don't pay in instalments
If you can afford it, then do pay your insurance premium as a single, lump sum. I like to pay using my cashback credit card, as this bags me a 1% rebate on my spending. If you don't have the full amount to hand, then try spreading your payments using a 0% credit card.
However, don't pay your insurer using monthly or quarterly repayments, as it may well charge you sky-high rates of interest for the privilege. In fact, these rates can be as steep as 30% APR.
With the Bank of England's base rate stuck at 0.5% a year, this is nothing short of a rip-off.
6. Ditch the add-ons
Finally, don't pay over the odds for add-on cover such as home emergency, legal expenses and identity theft protection. Invariably, these additional policies are over-priced and exist to enrich insurers at the expense of policyholders. In many cases, they offer poor protection and are quite unnecessary.
Similarly, you need to decide whether you can do without extra protection such as cover for accidental damage (say, spilling paint on a carpet) and personal possessions (items taken away from your home). Personally, I delete this protection and, instead, take very great care of my belongings when home and away!