Money: More savings than the sales

You'd be better off making yourself a safe bet for insurers

YOU may have found a few bargains in the January sales, but savings at least as big as these may be worth chasing for some key insurances this year.

Insurers are predicting potentially big increases in car and home insurance payments this year, as premiums are set to increase by as much as 10 per cent.

For the last few years premiums have tumbled, largely as a result of competition. As insurers have battled to undercut each other, some consumers have been able to save hundreds of pounds. But insurance is a cyclical business. As long as claims remain low, insurers can afford to slash prices. But once the cost of claims starts to rise, pressure on premiums follows, and inevitably policyholders face paying more.

Home owners and motorists need not be out of pocket, however. Even if your existing insurer is increasing its premiums, with a bit of common sense and shopping around you can ensure that you are not paying more for your insurance in 1998.

Insurers offer lower premiums to customers they feel are "less of a risk". This will depend on factors such as where you live, how old you are, even if you are male or female. There is little you can do to change this, but there are steps you can take to make yourself a safer bet for insurers - and save pounds on your premiums.

Most claims on household contents policies are for theft. By beefing up your home security this risk is reduced and insurers will offer discounts off their normal premiums. On the average contents policy costing around pounds 100, it is possible to make savings of up to 30 per cent.

According to a recent survey by the AA, which now offers a range of insurance policies, most UK homes have only very basic security. Only seven homes in 100 have burglar alarms. Most insurers, including Norwich Union, Guardian Insurance, Eagle Star and Direct Line, offer discounts between 5 and 15 per cent for fitting an alarm system.

David Ross, a spokesman for Guardian Insurance, says: "We offer a 7.5 per cent discount for customers with alarms. But, like most insurers, we insist that the alarm is set-up by a Nacoss [National Approval Council of Security Systems] approved installer."

This can be expensive. For an average saving of pounds 30 a year home owners could find they are paying upwards of pounds 400 to install an approved alarm. But if you already have an alarm, you should check your insurer is giving you the appropriate discount.

Security need not cost an arm and a leg, however. Some insurers, such as Norwich Union, will offer customers their own alarms for as little as pounds 5 a month. Insurers also offer discounts for window locks and deadlocks. These can be bought cheaply and can entitle you to roughly the same discount.

Graham Seward, underwriting manager at Eagle Star, says: "We offer a 15 per cent discount if home owners fit these locks. Of course, if they have an alarm as well, they can get an even bigger discount."

Even joining a neighbourhood watch scheme can result in a 5 per cent saving on your contents cover.

Motor insurers will also offer discounts if alarms or immobilisers are fitted. Immobilisers can be fitted quite cheaply, for as little as pounds 130. Insurers also encourage drivers to join Tracker, the stolen vehicle recovery system. This can wipe 10 per cent off your premium costs but, with costs starting at pounds 234 just to fit the system, plus a minimum annual charge of pounds 94, many motorists do not feel the discounts are justified.

Another good way to get your premium down is to opt for a higher excess. Most contents policies have a standard excess of pounds 50 which means you pay the first pounds 50 of any claim. But if you don't mind being subject to a higher excess, say pounds 100 or pounds 250, insurers will automatically knock between 5 and 10 per cent off your premium.

It is also possible to get a discount if you take out your buildings and contents insurance with the same insurer. These discounts are often only 3 per cent, but it does also mean that you will only pay one excess if you are claiming on both policies.

It is worth asking whether your insurer offers a no-claims discount as this can reduce your premium significantly over a number of years. Eagle Star will offer a 25 per cent discount after five claim-free years.

Car owners can also save money by restricting the number of insured drivers. Just one named driver could result in a 20 per cent saving. Many motor insurers also offer a 10 per cent discount for paying the premium in full, rather than spreading the cost throughout the year.

But perhaps the best way still to save money is to put in a few calls both to direct insurers and to a couple of good insurance brokers (who will not sell direct policies). Although it is hotly denied, some insurers' first question is still: "What have you already been quoted?" Claims may be driving up prices but insurers still want to hang on to their customers.

This is particularly true in the motor market. According to the AA, drivers can save as much as pounds 150 simply by putting a few calls in. And many insurance brokers can find cheaper deals for non-standard risks, such as younger drivers or drivers with a number of previous claims.

Many home owners are still paying over the odds by insuring their house contents with their mortgage lender. Rebecca Hadley, a spokeswoman with AA Insurance, says: "We estimate that householders can save pounds 1,200 over the life of their mortgage if they place this cover with a general insurer rather than a bank or building society."