Cut your costs, not your cover
In today’s tough times, everyone seems to be feeling the pinch. Therefore, it’s no surprise that saving money is at the top of many people’s priority lists.
A recent report by Liverpool Victoria revealed that more than five million Brits are planning to cut their insurance cover in a bid to save money over the next 12 months. Worryingly, statistics show that home insurance could be hit hardest.
More than 40% of people surveyed said they would consider cancelling or reducing their home insurance policy. However, before you make any hasty cuts to your home insurance cover, make sure you consider all the risks.
Credit crunch crime
Sadly, the risk of falling prey to property crime has recently increased. According to the Home Office's statistical bulletin for July to September 2008, domestic burglaries were up 4% compared with summer 2007 – and experts have already connected this rise with the effects of the recession.
This means that it is now more crucial than ever to ensure your home and possessions are fully protected.
While it is important that your policy does not leave you financially crippled, the right home insurance could save you from a serious financial headache that would worsen the pain of losing your possessions in the event of a disaster.
Here are four steps that could help you make savings on your home insurance without cutting back your cover.
Step One: Reduce the risk
All insurance policy prices are based on risk assessment and so to cut the cost of your insurance premiums, you need to cut the risk.
Insurers will calculate your potential risk as a customer by taking into account the type of property you own and the location in which you live. For example, if you live in an area with a high crime rate, you will probably have to pay higher premiums.
However, there are some simple measures you can take to reduce the risk you pose to an insurer.
You can help protect your property by:
• Replacing old, weak locks on your doors with five-lever mortise locks. These are harder for intruders to force open.
• Fitting key-operated window locks.
• Fitting security lighting and a burglar alarm.
• Joining a local neighbourhood watch scheme.
Do keep in mind that increasing security in your home could cost you more in the short term than paying higher premiums. Therefore, before you spend thousands of pounds converting your home into a fortress, make sure you take the time to work out what is the cheapest and safest option for you.
Step Two: Knowledge is power
Many people have no idea how much their possessions are worth, and therefore may overinsure or underinsure themselves by guessing.
If you are underinsured, any insurance claim you make may not cover the cost of the possessions you lose. By contrast, overinsuring the contents of your home means you’ll face unnecessarily high premiums. Remember, regardless of how much you insure yourself for, you can only claim back the equivalent of what you have lost.
By simply calculating accurately how much it would cost to replace the contents of your home, you can ensure you pay an appropriate price for your premium.
The simplest way to work out the total worth of your belongings is to go through every room in your house and write down what it would cost to replace each item at today's prices. The total will probably surprise you; the cost of replacing your DVD collection alone may well run to hundreds or even thousands of pounds.
It is also important to remember that very expensive items such as antiques should be professionally valued and insured individually. This will ensure they are adequately covered.
Step Three: Loyalty loses
One of the simplest ways to save money on your home insurance is to shop around for a new deal, comparing quotes from a variety of different companies.
Firms will fight for new customers by trying to undercut each other’s prices, and will often offer their lowest prices to new customers.
Unfortunately, this means those who stick with the same insurer year after year are rarely rewarded for their loyalty. In fact, it’s likely that loyal customers effectively subsidise other people’s cheap quotes!
Step Four: Choosing the best cover for you
There are various types of insurance policies available, so make sure that when you search for a new deal you are comparing like for like.
Choosing a new for old policy will cover the original price you paid for your goods, whereas a like for like policy will only pay out the current value of your possessions.
Most policies will have a compulsory excess amount, which is the sum you will have to pay out when you make an insurance claim. If you increase your excess, you could see the price of your premiums reduced.
However, be careful not to set your excess too high. Remember, you must be able to afford to pay it in the event you have to make an insurance claim.
Finally, be aware that some insurers may charge you interest if you choose to pay for your premiums monthly.
If you need to spread the cost of your policy over 12 months, you may want to consider paying the entire sum on a credit card with a 0% on new purchases deal. Provided you pay back the balance before the 0% deal expires, you will avoid any interest charges.
Paying for peace of mind
Steve Waller, Head of insurance at BeatThatQuote.com, says: “Although home insurance isn’t compulsory in the same way that motor insurance is, people should consider it just as much of a necessity due to the impact that a significant claim could have.”
In the current climate, I think it’s worth paying for the peace of mind that home insurance offers. Hopefully, these four tips will help ensure you aren’t paying over the odds.
**Articles featured on BeatThatQuote.com are for information purposes only and reflect the views of individual writers. Articles are not, and should not be considered as, financial advice. BeatThatQuote.com strongly encourages our readers not to rely solely on information contained within this article/our website, but to conduct their own research and seek independent advice about the financial products they purchase.**
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