Halve The Cost Of Home Insurance
Every day this month, we will be talking about money, helping you to manage your finances better and start getting more from your money. Today, we talk about how to save money on home insurance. Let's go!
In my two decades in financial services, I've worked for several good businesses and a few bad ones. However, whether I was working in banking, insurance or investment, I noticed one rule usually seemed to apply -- what I call my Rule of Three.
In a nutshell, my Rule of Three neatly measures the usual difference between the cost of the worst financial products and their rival Best Buys. For example, the Rule of Three illustrates the gap between the best savings accounts, paying annual interest of, say, 6%+, and a Don't Buy savings account which pays a measly 2% a year.
In other words, my Rule of Three is a handy index to weigh up the relative value of competing financial products. Indeed, it works particularly well when applied to everyday buys such as home insurance for buildings and contents.
A typical household can expect to spend around £360 a year (£30 a month) on home buildings and contents cover. However, a large proportion of policyholders don't bother to shop around at renewal time. This leaves them at the mercy of annual premium hikes from insurers, who know that loyal customers will absorb moderate annual increases without complaint.
However, by shopping around for buildings and contents cover, it's easy to reduce your spend on this protection by around a third. Thus, a little bit of effort could produce a yearly saving of around £120. In some circumstances, you might reduce your premium to an even greater degree -- such as paying less than half your previous premium.
Recently, when I was shopping around for basic contents insurance, I was quoted annual premiums ranging from £55 to more than £160. As you can see, the most expensive quote was three times the cheapest, which elegantly endorses my Rule of Three.
By the way, the severe flooding across England earlier this year demonstrated the worth of home insurance. According to some estimates, typical flood claims averaged between £20,000 and £30,000, which few of us can afford to lose. So, if you don't yet have home insurance, then you may have a lot to lose if disaster strikes. For more information on picking the right policy, read our free guide to home insurance.
Finally, when your next renewal notice drops onto your doormat, don't be tempted to take the easy option and let your home insurance renew automatically. Instead, prune your premiums using Fool.co.uk's home insurance service. This could produce a saving of hundreds of pounds this year, next year, and for many years to come!
Next Step: Did you know that you don't have to wait for your renewal letter to look for a better quote? Admittedly, there may be a cost penalty for cancelling your insurance policy early - but provided you haven't made a claim or suffered a loss that may lead to a claim - this could be a lot less than the saving you make - resulting in a net profit!
So for example, if your policy is with Norwich Union, it will charge £30.45 for cancelling your policy early. But if you're able to reduce your annual cover quote by £100, then it's a £69.55 profit!
What are you waiting for? Visit our Insurance Service and get a new quote.