Shopping around for valuations, increasing your excess and buying policies online can reduce the cost of home insurance, writes FIONA REDDAN
WHILE WE are in a period of falling prices, one expense that always increases during a recession is the cost of insurance. According to the Irish Insurance Federation, many insurers are selling home premiums at a loss, so it is not unreasonable to assume that prices are headed in only one direction – up. But what can you do about it?
Like most financial products, it is extremely difficult to compare home insurance policies on a like-for-like basis, as most providers offer different discounts, have different loadings and include different extras.
However, by applying some basic rules in your home insurance search, you could save as much as €400, simply by taking on board the tips below and shopping around.
DOs
Keep a close eye on indexation
Most insurance companies automatically increase the amount of your buildings and contents cover when they renew your policy each year in order to prevent you from being under-insured. However, at a time of falling prices, your cover may need to be revised downwards rather than up. This does not mean that insurers will do so without you requesting it.
Some insurers apply an automatic increase of about 8-10 per cent each year, while others, such as Bank of Ireland, follow indicators such as the Durable Household Goods Section of the Consumer Price Index.
If your insurer is still applying increases, you may need to request a reduction in the amount of cover you have. Remember, the more expensive the value of the house and contents you are looking to insure are, the more expensive the policy will be.
A good example of the risks of allowing your policy to be index-linked is shown by the cost of rebuilding your home, which has fallen by about 5 per cent in the past year according to the Society of Chartered Surveyors’ survey for 2009, even though many insurers continue to increase the rebuild value in home policies.
Consider increasing your excess
When making a claim, you frequently have to pay a certain amount yourself, known as the “excess”. The cost depends on the insurer, but normally it is €100 – €300. However, if you agree to a higher excess, you can often get a discount on your premium.
For example, Hibernian Aviva offers a 2.5 per cent discount if you agree to an excess of €200, while Allianz also gives a discount if you increase your excess to €500.
Do remember to get extra cover for individual items
Most insurers put a limit on the amount you can claim for a single item under a standard policy. For example, at Bank of Ireland and Quinn Direct, the single article limit for valuables such as jewellery, works of art and antiques, is €2,000, so anything in excess of this needs to be listed separately on your policy.
However, be prepared to pay more for this, as the cost of a €10,000 engagement ring for example, can push up the value the cost of your policy by about €100.
Moreover, there is usually a limit on the value of these items, as a percentage of your overall contents. For example, at Hibernian, the cost of individual items cannot exceed 30 per cent of your contents’ cover, so if you have several expensive items, you will need to increase your overall contents cover.
Shop around for valuations
A requirement for many home insurance policies is that valuation certificates are provided for items that are insured individually and that jewellery is examined and serviced every two years by an accredited jeweller.
However, this can be an expensive requirement, as many of the big name jewellers charge a fee, as well as a percentage of the overall value, for the service.
Weir’s on Grafton Street for example, charges a fee of €45 as well as 1.5 per cent of the overall value of the ring, which works out at an extra €15 for €1,000. So, if your diamond ring works out at €15,000, the cost of having it valued will be €270 – almost the equivalent of an additional home insurance policy!
Instead, you should ring around and look for a jeweller who charges a flat fee, such as Lance Grossman in Dundrum, where valuation costs €70.
Buy your policy online
Insurance companies like you to do your business online, as it saves them money. As a result, many offer discounts to encourage you to sign up online. Allianz offers a €65 discount when you buy a new policy with them online, while AIB gives an online discount of 10 per cent.
Use the “cooling off” period
It has happened to all of us. You purchase a new insurance policy and the following day in the newspaper you see a competing firm offering the same policy for 20 per cent less. What can you do?
Each insurance policy is subject to a “cooling off” period of at least 14 days, which means that you can cancel your policy, provided you have not made a claim during this period, get back your money and sign up with the cheaper insurance provider.
Secure your home
Fitting a burglar alarm can help bring down the cost of home insurance significantly. Hibernian offers a discount of 10 – 15 per cent, with alarms that are monitored 24 hours a day benefiting from a reduction at the higher end of the scale.
Smoke alarms can also help reduce the cost of your policy, by about 5 – 10 per cent, while security locks frequently earn a discount also. In addition, areas that are covered by a neighbourhood watch scheme usually get an extra discount of about 5 per cent.
Shop around if you cannot get cover
Many of the mainstream insurance providers do not provide cover for non-standard items, or if your house has unusual features such as a flat roof. If you fall into this category, you may be better off to look for insurance via a broker.
For example, if you have a musical instrument collection you want protected, Dolmen Insurance Brokers offers a scheme through Royal Sun Alliance for about €91 per musical instrument. For high net worth individuals, Axa has an “excellence” package, which insures contents, collections and personal possessions worth €125,000 or more.
DON’Ts
Don’t get “all risks” cover – unless you need it
“All risks” cover protects against loss or theft of or accidental damage to personal valuables such as jewellery outside your home as well as inside. As a result, you will pay more to have it included on your policy, so think before you purchase.
Also, you may end up being covered for the same loss under more than one policy.
For example, if your money is stolen while you are on holiday, this may be covered by your all risks household policy and also by your travel insurance.
As you cannot claim under more than one policy for any loss, it may be unnecessary to have such cover.
Do not be afraid to negotiate
In the current environment, insurers are keen to hold on to business, so if you get a better quote from a competing insurer, the first thing you should do is ask your own insurer to match it.
Don’t make a claim
Before you claim for a freezer full of destroyed food, first consider the impact it will have on your policy. Like car insurance, the more you claim the more expensive your policy will be, as many insurers offer a discount for claim-free policy holders.
For example, FBD offers a no-claims discount of 20 per cent for people who haven’t claimed in two years.
Don’t be loyal
While insurance companies frequently offer discounts if you have multiple policies with them – Hibernian Aviva offers a 5 per cent discount, while at Axa it rises to 15 per cent – you should investigate whether this discount has any significant impact on your policy and whether or not you might be better off to go with another insurance firm as some companies you may be unfamiliar with often offer the best deal.
For example, UK insurer Lloyds, which offers cover to Irish residents via www.getcover.com, frequently emerges as one of the cheapest in surveys conducted by the Financial Regulator.
Don’t be swayed by extra benefits – unless you actually need them
Some insurers offer extra benefits on policies, such as increasing your cover around the time of a wedding, or at Christmas, to account for the cost of presents stored in the home.
For example, Allianz automatically increases the value of your contents by 10 per cent in December and January, while it also provides cover of up to €320 for any loss or damage to shopping while it is being transported from the place of purchase to your home.
At Hibernian, up to €650 is offered to cover the cost of replacing food damaged in your domestic freezer.
However, while there is no fee for these extras, which are treated as standard benefits, they may result in increasing the overall cost of your policy, so bear this in mind when shopping around. Moreover, you may be disinclined to claim these benefits should the occasion arise due to the impact it would have on your no-claims discount.
Most insurers also offer optional extras, such as covering your possessions outside of the home, but an extra fee is charged for such cover so think carefully whether or not you need it before agreeing to it.
Don’t pay over 12 months
One way that insurers look to earn more than the figure you are quoted for your policy is by charging a service fee on premiums that are paid in instalments. Allianz charges 8 per cent of the value of your premium if you pay by direct debit over 12 months, while at Hibernian Aviva, the cost is 6 per cent. However, some insurers, such as AIB and Bank of Ireland, don’t charge for spreading your payments, so check the fine print before you sign up.
Don’t lie to your insurance company
When asked by the insurance company whether or not your alarm complies with certain standards, or if you have certain security fittings on your doors and windows, you must tell the truth as blindly saying yes may invalidate your whole policy.
Another important thing to remember is that if you told the insurance company that you have a burglar alarm and if the house is burgled and the alarm was not set, depending on the policy, you may have no cover.
Similarly, Bank of Ireland does not provide cover for possessions stolen from a car which weren’t concealed in the glove compartment or locked in the boot.
Don’t be tempted to under-insure the value of your contents to get a cheaper quote
By doing so you may only get a proportion of the value back if you make a claim, if the policy has an “average clause”.
For example, if the contents of your home – and remember that contents includes your clothes, carpets, kitchen appliances etc – are actually worth about €40,000, but you only insure them for €20,000, if a fire destroys some of your contents, the most you can claim back is just 50 per cent of their true value due to being inadequately insured.
Don’t take too long to renew
From June 1st, the non-life insurance levy of 2 per cent is being increased by 1 per cent, so if the in force date of the policy is on or after this date, the higher rate will apply.
