How to cut the cost of your cover

It pays to meet a broker face-to-face
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The Independent Online

The average household spends more than £1,000 a year on home and motor insurance, and just a few minutes a year ensuring that they've got the best deal. Families could save a lot by shopping around when they renew. But less than 20 per cent of homeowners and only 50 per cent of motorists do.

More fool them. This month, Norwich Union announced it was hiking its motor-insurance rates by up to 40 per cent, and many of its rivals are expected to follow. Norwich Union knows that up to 60 per cent of its customers won't bother to look elsewhere.

"This is why Norwich Union has increased its prices," says Richard Mason of the the cost-comparison website Moneysupermarket.com. "Only a few years ago, Norwich Union had an 80 per cent retention rate. That allowed it to offer a discount to new customers in year one, and then increase premiums.

"The retention rate is now down to 60 per cent, but that's still high. And it's even greater on home- insurance policies. Every insurance company will rip you off in year two."

There are many ways you can cut your home- and motor-insurance premiums. There are also traps to avoid if you want to get the proper payout when you make a claim.

MOTOR

Being less of a risk to your provider is an easy way to cut the cost of insurance. "Holding on to your no- claims bonus is the best way of keeping your premiums down," says Peter Staddon, of the British Insurance Brokers' Association. "But also: Is your car off the road at night? Are you limiting your mileage? Have you got additional drivers on the policy?"

Premiums will often be reduced if you name your partner on the motor policy, too. Telling your insurer that you don't need to be covered to drive other cars (standard with most policies) could also get you additional discounts.

Also look at one of Tesco Personal Finance's or Norwich Union's no- frills policies. These get rid of personal-injury cover and the free courtesy car. They usually have higher excesses, too.

"People need to think carefully about what they're giving up with no-frills policies," Staddon cautions. "My worry is that people will swap, thinking that they're getting the same deal, only to find out they're not when it's too late."

Keith Milne, the head of personal lines at Norwich Union, points out there are even simpler steps you can take to save money, such as buying your policy online, or paying your annual premium in one go.

Finally, motorists will soon be able to cut their premiums by opting to use new pay-as-you-go technology. Both Norwich Union and More Than are trialling this, using black boxes to track motorists' usage. More Than is targeting young drivers, in particular, offering them a bonus at the end of the year if they don't drive between the hours of 11pm and 6am (when most crashes involving teenage drivers take place).

Norwich Union is looking at using the technology to charge drivers according to their usage. If they drive at higher-risk times, they will be charged more, and vice versa. If they keep their car in the driveway for six months a year, they'll be charged a lot less.

Mason believes this will be a huge development in the motor-insurance market. "If you look at the mobile-phone market, 50 per cent are contract and 50 per cent are pay-as-you-go. We think the car- insurance market may go the same way," he says.

HOME

Unlike the motor-insurance market, premiums in the home-insurance arena have been coming down recently, as crime levels have fallen and a price war has taken off.

"The home market has been extremely competitive over the past year or two," says Milne. "There are two ways this is manifesting itself. Firstly, some insurers have simply been reducing their premiums in a broad-brush fashion. But we've also seen a number of others trying to attract customers with offers. For example, we're offering customers 50 per cent off their contents insurance until 2008 (as long as they have a five-year no-claims discount), if they take their building cover out with us as well. Others have promised to beat customers' renewal quotes, or have offered cash incentives to switch."

Many of these offers are good value, but it's important to remember to switch in a year's time. The insurers are banking on you forgetting.

Many of the other ways to save money on home insurance are similar to the techniques used for the motor market. Making yourself less of a risk by signing up to the local Neighbourhood Watch scheme or installing good locks and a burglar alarm will all make a difference. If there's someone at home during the day, this can also bring your rate down.

Mike Holliday-Williams of More Than warns that it's particularly important with home policies to ensure that you're not under-insured. More Than insures all its clients' contents up to £75,000, but many providers have much lower limits.

Mason says that even if you are not making a claim up to the limit, you could still be affected. "If you've got £25,000 of contents and only £20,000 of contents cover, then even if you put in a claim for just £2,000, the insurer may only cover 80 per cent of the claim, because you only insured 80 per cent of your possessions."

It's worth checking you're covered for costly items outside the house as well. Milne points out that with the rise of iPods, mobile phones, portable DVD players and laptops, many people now carry technology worth thousands of pounds on their person. But will your home insurance cover you if these items get lost or stolen?

The easiest way to shop around for motor or home policies these days is using the internet. Cost-comparison websites such as moneysupermarket.com and confused.com will help you search the market for a policy that suits your needs. Another good way to ensure that you end up with a policy tailored to your requirements is to use a broker. To find one in your area, visit www.biba.org.uk or www.unbiased.co.uk.

After years of taking to the phones to find the best motor and home insurance deals, Joseph and Ethel Campbell had become concerned that they were not always securing the level of cover they needed.

As a result, when their home policy came up for renewal this year, the couple decided to see a Bradford & Bingley broker face-to-face to carry out the search for them, and to ensure they found a policy tailored to their needs.

"Every time you phone up one of these companies, you don't know who you're talking to and where they are based," says Joseph. "If you go face-to-face you can feel much more confident that you're getting exactly what you want."

The Campbells saved more than £40 on a new policy with Royal & SunAlliance, and were impressed that when their boiler broke down just a few weeks later, their insurer had a plumber at their house within an hour. With their motor policy coming to its end this week, Joseph says he's wasting no more time on the phones - just one trip to his broker.

How to save

Shopping online for your home and motor insurance could save you up to 20 per cent.

Opting to pay your annual premium in one go, rather than monthly instalments, will save you paying interest and the insurer's administration charge

Increasing your excess (the amount of any claim which you are liable to pay) can make a significant difference to your premiums

Cut out unnecessary extras such as personal accident cover, or cover to drive other people's cars

Make yourself a lower risk. For example, to cut your home premiums, join your local neighbourhood watch scheme, or install better locks at home. To impress your motor insurer, keep your car off the road at night, or try to cut down your annual mileage.

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