Squash your insurance costs!

Find out how to slash your insurance costs in five easy steps.

It seems that the recession is prompting more Britons to get 'imaginative' when it comes to insurance claims.

According to a new study by the Association of British Insurers (ABI), 107,000 fraudulent insurance claims were exposed in 2008 - a rise of 17% on 2007 figures. That equates to some 2,000 fraudulent claims made every single week.

And the total annual value of dodgy claims rose even more sharply year on year - up 30% to a whopping £730 million in 2008.

Claimants' creative juices really got flowing when it came to home insurance. This sector accounted for over half of all fraudulent claims - over 55,000 attempted fiddles. And that's just the ones we know about!

So have you ever been tempted to 'fudge' an insurance claim?

Like, totally bogus, dude!

If the answer's yes, you're not alone. In a survey carried out for the ABI by YouGov, one in five people said they wouldn't rule out making a fraudulent claim in the future. In fact, some people go to extreme lengths to cheat the system.

One man claimed that his car had been stolen from a car park. The car was found at the bottom of the cliff, and (after an investigation), the chap admitted that he'd pushed it over the cliff himself, and planned to use the insurance money to pay off his debts.

Elsewhere, a woman claimed for a lost engagement ring, and was told that her home insurance policy didn't cover her outside her house. Not to be deterred, she extended the cover, and the next day claimed for the loss of the same ring. Wouldn't it be lovely if things worked like that!

Why not?

You may not think there's much wrong with being imaginative. After all, insurance companies are huge and highly profitable - and you've been handing them your cash for years.

In reality, fraudulent claims affect everyone. It's estimated that fraud adds an extra £40 a year to the average premium, as insurance companies try to claw the lost money back in other ways.

And - forgetting the moral angle - you'll get into an awful lot of bother if you're caught. You'll face:

• - A criminal conviction
• - Much higher insurance premiums in the future
• - Huge damage to your credit record, limiting your ability to take out a mortgage, credit card or loan.

- It's really not worth the risk!

Five cost-cutting insurance tips

Fortunately, there are plenty of legitimate ways to cut your insurance costs. Here are my top five tips:

1. Shop around

I've said it before and I'll say it again: The single best way to slash your premiums is to shop around. Loyalty to your existing provider doesn't pay, as it's usually new customers who get the best deals and discounts.

So - if you're about to renew your home, car or travel cover, use online comparison tables to find the best possible deal.

2. Don't double up on cover

Many people ending up spending more than they need because they inadvertently cover the same things twice.

For example, don't automatically buy extra insurance to cover valuables carried in your handbag; these items may already be covered by the 'personal possessions' element of your home insurance policy.

To find out whether you're paying twice for insurance, read Don't double up on cover.

3. Don't pay in instalments

Generally speaking, it's not a good idea to pay for yearly cover in monthly instalments. Your insurer is effectively lending you the money to cover the whole year, and is likely to charge you huge amounts of interest (up to 30% APR or even more) for the privilege.

So - if you possibly can, pay the full amount upfront. If you can't lay your hands on the full sum, you could get an interest-free loan in the form of a 0% purchases credit card. Just make sure you clear the balance before the 0% period ends.

4. Pay a higher excess

If you agree to pay a higher voluntary excess (the bit you shell out before the insurer steps in), you could lower your overall premium.

In the case of car insurance, for example, you could cut the cost of your cover by 10% or more. For more ways to insure your motor for less, read Ten ways to cut your car insurance costs.

5. Avoid rip-off products!

Finally, you could save a packet by avoiding certain types of insurance altogether.

The insurance sold with mobile phones, for example, is generally hugely over-priced and full of exclusions. If you really want to insure your phone, a stand-alone provider will usually provide better value cover.

Alternatively, get it covered under the 'personal possessions' section of your home insurance. Read The big mobile phone insurance scam! to find out more.

And to find out about more insurance products you could do without, read this article.

So there you have it. Five ways to lower your insurance costs without ending up in prison.

More: Beware this insurance loophole! | An easy way to reclaim rip-off premiums

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