Personal finance: Why do you pay so much? Part 3: household and motor insurance policies

Financial review: how to be prosperous in '99

INSURANCE is rarely sexy or fun. It is at best a practical necessity; in the case of motor cover, it is a legal requirement. There's plenty of competition for business, but many people just renew their car or household cover year after year. They are probably wasting thousands of pounds.

If you are prepared to call round several insurance companies, then you will probably save significant sums. An easy one to sort out is buildings and contents cover.

A large proportion of households buy their cover through their bank or building society. Often borrowers pay over the odds for their cover and the difference can be quite marked. The annual premium for contents cover for a two-bedroom flat in north London with Barclays Insurance Services, is over pounds 300 a year. With Norwich Union Direct, the premium falls to just under pounds 200. A similar policy with General Accident, through insurance brokers Berry Birch and Noble, costs just pounds 120 a year.

Insurance brokers can offer savings because they have access to policies from several insurers. They can also tailor policies more carefully to their clients' needs. Some insurers are not competitive in inner-city areas or prefer not to deal with households where someone works from home.

Sometimes a specialist insurer will take on a risk that larger insurance companies cannot handle, or only handle at a high cost: thatched houses, houses built with timber frames, or rented properties are among the more common examples.

Specialist policies and niche insurers use their claims information to cut premiums without limiting cover. The niche insurance market has moved on from specialising just in high-risk customers - such as people with drink driving convictions - to a broader audience. Older drivers with expensive or high-performance cars can obtain discounts: insurer Guardian Royal Exchange operates such a scheme.

Occupational groups such as teachers can buy cheaper insurance through unions and professional bodies.

"A scheme can be a good idea, because it can be significantly cheaper where it is dedicated to certain occupations or lifestyles," explains David Ross, spokesman at Guardian. "Insurers know their customers better, so they can make a more accurate assessment of the risk."

Judging the right amount of insurance cover is not easy and it is safer to err on the side of over- rather than under-insurance. In the case of a claim where a household is underinsured, the insurance company has the right to scale down the claim proportionally. If the loss adjusters believe that the home was under-insured by 25 per cent, the company would be within its rights to pay just 75 per cent of the claim.

The simplest way to calculate the right amount of contents cover is to make a detailed list of possessions, and then check the replacement cost of the items.

For buildings cover, most surveyors will produce a typical rebuilding cost when they assess a property for a buyer; that sum can then be adjusted for inflation.

Watch out for duplicated cover. Travel policies often charge extra to cover valuables and these might be insured already under a home contents policy.

Two other simple ways to save on premiums are by increasing the excess and improving security. Home contents cover usually has a standard excess - the amount a customer has to pay out of each claim - of pounds 50. Increasing that excess to pounds 100 or even pounds 250 can cut the cost of cover quite sharply as the insurer knows it will not be troubled by small claims.

Many insurers give discounts to non-smokers and households with smoke alarms. It is worth checking what counts for a discount before you spend any money. DIY burglar alarms may well deter burglars but insurers will usually only reduce premiums for a professional alarm installation with a maintenance contract.

Contacts: ABI, 0171-600 3333; Barclays Insurance Services, 0181-253 3200; Berry Birch and Noble, 0800 854074; Direct Line, 0181-686 8877; Guardian Insurance, 0800 282820; Norwich Union Direct, 0800 888223.

General information on insurance is available on the ABI's web site:

Suggested Topics
Jacqueline Bisset has claimed that young women today are obsessed with being 'hot', rather than 'charming', 'romantic' or 'beautiful'
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Arts and Entertainment
A bit rich: Maggie Smith in Downton Abbey
tvSeries 5 opening episode attracts lowest ratings since drama began
Arts and Entertainment
Ben Affleck stars as prime suspect Nick Dunne in the film adaptation of Gone Girl
filmBen Affleck and Rosamund Pike excel in David Fincher's film, says Geoffrey Macnab
Arts and Entertainment
Lena Dunham
booksLena Dunham's memoirs - written at the age of 28 - are honest to the point of making you squirm
Life and Style
fashionThe supermodel on her career, motherhood and Cara Delevingne
Life and Style
A new app has been launched that enables people to have a cuddle from a stranger
techNew app offers 'PG alternative' to dating services like Tinder
ebooksAn unforgettable anthology of contemporary reportage
Greg Dyke insists he will not resign as Football Association chairman after receiving a watch worth more than £16,000 but has called for an end to the culture of gifts being given to football officials
Arts and Entertainment
Jake Quickenden sings his heart out in his second audition
tvX Factor: How did the Jakes - and Charlie Martinez - fare?
premier league
Frank Lampard and his non-celebration
premier leagueManchester City vs Chelsea match report from the Etihad Stadium
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

COO / Chief Operating Officer

£80 - 100k + Bonus: Guru Careers: A COO / Chief Operating Officer is needed to...

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments