How to cut the cost of your home insurance
By Kate Saines
In a world where everything seems to be rising in price, you’ll be relieved to hear there’s one financial product which appears to be costing us less – home insurance.
Yes, home insurance premiums, are going down. It might be slight and there are certain parts of the country which are enjoying bigger reductions than others, but there’s a definite dip.
If you live in Jersey you have the most reason to celebrate. Homeowners on the island are winning the postcode lottery for home insurance premiums according to research by Moneysupermarket.com having enjoyed an average 13 per cent decrease between summer 2010 and spring 2011.
South and east Londoners have also experienced reductions of seven per cent each.
Meanwhile the AA British Insurance Premium Index reported in July a small fall over three months in both buildings and contents insurance premiums for everyone.
Does all this sound too good to be true? Of course it does. Because while the statistics don’t lie, the bad news is premiums are unlikely to continue on this downward trend.
Simon Douglas, director of AA Insurance, said home insurers are suffering increases in the cost of severe weather claims and fraud.
Mr Douglas said: “The number of people attempting to make claims for losses that are grossly exaggerated or non-existent has risen sharply, according to the Association of British Insurers (ABI).”
But insurers will also need to build their reserves to prepare for any future weather problems we might face.
He added: “My concern is that insurers may be faced with more regular, extreme weather events. If that happens, then current premium rates will not be sustainable and premiums might have to be brought sharply into line.”
While we cannot control the weather, we do have a little more say over our premiums. If you are worried about future rises, or finding it hard to pay the current cost of your home insurance, here are a few tips which may help reduce your premiums.
Tip 1: Preparation – secure your home
Before renewing or buying home insurance ensure your home is, quite literally, safe and sound. Do this and you’ll arm yourself with ample evidence to persuade potential insurers you are a good bet.
If you have moved into a new home, change the locks because previous owners may have given copies of the keys to friends or family.
Moneysupermarket recommends you maintain locks and suggest using five-lever mortise locks for external doors and two-bolt locks for windows.
Fitting an alarm will also make you popular with insurers. You’ll find some insurers may prefer specific alarm systems, says Moneysupermarket, such as the NACOSS standard alarm, which can cut premiums by up to 7.5 per cent with some companies.
Meanwhile AA Insurance recommends joining your local Neighbourhood Watch scheme along with fitting movement-sensitive exterior security lights or just putting interior lights on a timer when you are away, giving the impression someone is home.
“Good security measures can get you discounts on your home insurance,” said an AA spokesman.
It’s not just warding off thieves which will help reduce your premiums. Limiting the chance of problems before they happen will mean you are less likely to make a claim and this will help reduce premiums in the future.
Make sure pipes are insulated. If that’s not possible, try to run the heating during cold spells for a short time (at least) every day to prevent frozen pipes.
It’s also worth checking for subsidence – something which ideally should be done when you purchase a property.
Moneysupermarket said you should continue to look out for this as it’s one of the most common problems to affect the home, and is usually covered by buildings insurance.
Fitting smoke alarms and following fire prevention advice is a must. Most insurers will now ask if you are a smoker as lit cigarettes are a potential hazard.
Tip 2: Switch to a new insurer
There are lots of statistics out there which illustrate the huge savings which can be made by simply moving your home insurance to a new insurer.
Confused.com, for example, reckons you can save on average £93.43 per year by switching providers – so it’s clearly well worth the effort.
Make sure you find out what your current insurer is offering you to renew first. This will give you a figure on which to base comparisons.
There are many companies out there which offer price guarantees and promise they will beat your renewal premium – so see how their prices fare.
Don’t stop there. Visit price comparison websites and see if you can get a better deal with any other insurers. And try re-applying to your current home insurer to find out whether you’ll get cheaper quote as ‘new customer’.
Mark Gabriel, head of home insurance at Confused.com, said getting a better price was not the only incentive for scouring the market.
“Shopping around can not only ensure the best value for money deal, but can also prompt householders to ensure they have the right level of cover,” he said.
“Have expensive new technology or jewellery items received as Christmas or birthday gifts been added to the policy for example? Undervaluing the contents of your home could end up costing hundreds of pounds in the event the property was burgled or badly damaged by flooding or fire.”
Remember to let your current insurer know you have switched.
Use the Myfinances.co.uk comparison tables to find a better deal on home insurance
Tip 3: Consider combined buildings and contents insurance
Some insurers will offer you a discount – often as big as 20 per cent or 25 per cent – for taking out both your buildings and contents insurance with them at the same time.
Not only will this save you money, but it will also save on paperwork and admin.
Before going ahead with this, however, make sure the saving you are getting for this combined insurance deal is bigger than any savings you might get buying contents and buildings cover separately elsewhere.
The AA’s most recent Shoparound index for home insurance premiums found while home insurance premiums had fallen by 1.1 per cent over the second quarter of 2011, combined buildings and contents policies had risen by 1.5 per cent.
Tip 4: Take advantage of any offers
Discounts on combined insurance are just one method employed by insurers to lure you in. Many also use freebies and vouchers or even cashback to tempt new customers.
Sainsbury’s and Tesco often run special offers where they hand out shopping vouchers to new home insurance customers. Likewise, they also run promotions where they’ll top up loyalty cards with additional points as a ‘thank you’ for taking out their insurance.
And they are not the only insurers offering these deals. Watch out for introductory offers, online discounts and half price deals.
Tip 5: Pay your insurance premium in one go
Many insurers rely on the fact annual premiums are a lot to pay at once by offering you the chance to pay monthly by direct debit.
The problem is this can often be a more expensive option. Research by Moneysupermarket.com found homeowners could pay on average an extra 11.89 per cent on their premiums by opting for monthly instalments.
Not all insurers charge extra for this benefit – so if you have no choice, it’s worth doing your research and hunting down an insurer whose premiums are the same for both one-off and monthly payments.
And there is another option. Pete Harrison, Moneysupermarket’s insurance expert, said: “Using a zero per cent purchase credit card to pay for home insurance allows people to spread the cost over monthly instalments without accruing interest.
“However, credit card users need to be disciplined and look to pay off the balance within 12 months, or before the promotional rate expires, whichever comes first, otherwise you may end up paying insurance which is no longer valid and have to pay for a new policy as well.”
Tip 6: Don’t over insure yourself unnecessarily
While being underinsured could see you invalidating a claim – taking out more than you need is just an unnecessary expense.
There are lots of add-ons you can buy which you might not need. Moneysupermarket said you should think about whether you need accidental damage cover, for example.
Buying this extra can increase premiums by 25 per cent so should only really be purchased if you think it’s essential.
There are other add-ons which might seem as if they are saving you money, but could be a false economy.
Take voluntary excesses, where you opt to pay a higher excess should you come to make a claim. It is well known by taking out a voluntary excess you can reduce the cost of your premiums.
Research by Moneysupermarket found the average cost of buying insurance with a £0 excess was £252 per year, while those taking on a voluntary excess of £500 would pay just £152 annually.
But it’s important you think carefully when taking this approach. Because while paying £100 less a year will provide you with a huge discount initially, if you came to make a claim you would be forking out £400 more than someone with no voluntary excess.
Moneysupermarket advises you set your total home insurance excess at a level you feel comfortable paying if you had to make a claim.
Use the Myfinances.co.uk comparison tables to find a better deal on contents insurance