The complete guide to saving money on home insurance and paying less for your insurance policy.
Insurance premiums are tough; they come around yearly (or monthly) and drain us of cash flow while protecting us should the worst occur.
Home and contents insurance (sometimes referred to as home build insurance and home contents insurance when separated) is a big cost for many Australian’s.
Here I wanted to outline a few ways to pay less for your home insurance and in turn save some money.
If you have any other tips, tricks or hacks to save money on home insurance – please leave a comment after reading.
Increase your excess: reduce your home insurance premium
A great way to reduce the cost of your home insurance is to simply play around with your ‘excess’. Your ‘excess’ is the amount of money you agree to pay should you need to initiate an insurance claim. By default, many insurers set the excess as a small number; often around $100.
What happens when you increase your excess?
You can ask your home insurance provider to toggle this excess upwards in cost, in turn reducing your yearly home insurance premium. Essentially you are taking on more risk should you ever need to make a claim as instead of paying $100 come claim time, you might agree to instead pay $500.
What are the pros and cons of increasing your excess?
On the whole, it might allow you to save money on your home insurance. The higher the excess, the lower the premium you have to pay.
You will need to assess how often you claim (if at all) and what excess you could afford to pay if something unexpected did go wrong. You don’t want to find yourself unable to claim because you are short of cash.
It’s also wise to remember that home insurance is often comprised of two parts:
- Building insurance (your actual house)
- Contents insurance (your personal possessions)
Most insurers will let you set different excess amounts for each part of the policy. A great way for people to make a personal decision about what is most valuable to them and how much excess they can afford.
If you do increase your excess, find a way to bank the savings and keep them set aside for unexpected events.
Don’t overvalue your home and contents
Often we are asked over the phone or online ‘what’s the value of your contents?’ when signing up for home insurance. The reality is, there is no way in the world we can be expected to know that.
This often leads to large values or big round numbers being used. Commonly people will simply say ‘$30,000’ or something similar when it comes to valuing goods.
The trick to saving money on your home and contents insurance is to get a better understanding of what the actual cost to you would be if you:
- Had to rebuild your building (including fittings)
- Had to replace your possessions/contents
Instead of giving a round figure for your contents value, why not try this:
Walk around your house and assess things you would want to replace if the worst occurred. Just because you have a hideous black bookshelf from IKEA when you first moved out of home doesn’t necessarily mean it makes your ‘must have replacement’ list.
Focus on big ticket items like TVs, computers, sentimental items, jewelry and major furniture pieces. Once you have the basics covered you can ascertain your big costs and then begin looking at the smaller things.
The goal is to give a realistic number the next time you are asked the value of your home contents.
The less you are willing to insure, the lower your premium (in most cases) so remember to only insure what you really need.
Pay your home insurance yearly, not monthly
Most home insurers offer the ability to pay your premium monthly or yearly. While some home insurance companies make this price the same (the yearly cost divided by 12) – many insurers simply tack on 20% extra in cost to cover the monthly payment option.
Whenever possible, opt to pay yearly. It will save you money and get the expense of home insurance done and dusted while saving you money.
If you do not have the cash flow to pay for the yearly premium in one go, you should set yourself a goal for the upcoming year to save enough money to pay your home insurance premium yearly ongoing – save money, save time and get rid of recurring monthly payments that cost you more.
Be careful of ‘portables cover’: it’s expensive
‘Portables cover’ essentially covers you for items you own and specify in your policy, outside of your home (and potentially in your car).
It’s to cover your loss should you lose say an engagement ring while at the beach or perhaps a laptop when your car is broken into.
This type of cover is often very expensive. In many cases, it can cost you up to 50% of your premium for an expensive item like a ring.
Think long and hard about what items you want to cover, their value and whether portables cover is required. Cover outside of the home becomes more expensive and has the ability to greatly increase your home insurance premium.
Install locks on all doors, windows and entrances
Home insurers love to know your home is secure. The more deadlocks, window locks, bars, shutters and security elements you have; the cheaper your home insurance premium will be.
Consider getting your home security audited and perhaps play around with online insurance premiums based on what it would cost to install. You might just find a couple hundred dollars worth of time with a locksmith could save you significantly ongoing.
Install an alarm: it pays for itself
Similar to above, an alarm often pays dividends. Assess the cost of installing an alarm in combination with your door and window locks and see what it does to your yearly premium.
Remember, you can toggle all of these elements on and off when doing a home insurance application online; a great way to see how much money you could potentially save and whether its worth the expense.
Compare your policy every single year: here’s why
Just because your policy was the cheapest you found last year, doesn’t mean it’s still the cheapest this year.
Often home insurance companies will lower their first year and then reduce the second year to attract new customers.
I’ve personally seen my home insurance premium rise by 25% with one of the biggest home insurers in Australia. Needless to say, I wasn’t impressed and found a new provider.
The trick is to compare your home insurer against new suppliers each and every year.
Have zero loyalty. The only thing you should care about is getting the right home insurance policy at the right price.