Week 6 of the Money Makeover Challenge
Our annual house and contents insurance policy renewal arrived a few weeks ago. And at $1,500 odd a year, it is one of our bigger annual expenses. Now I wasn’t confident of saving much, if any, money on this week’s challenge. (I had a hunch we were already on a pretty good deal.) But I did want to understand what I was actually covered for and whether it suited our needs. Any savings would be a bonus.
House insurance can fall in to the “confusing” category for a lot of people – me included. When you compare electricity companies for example, they all provide much the same product. However with insurance, you buy a specific policy which will vary between companies and even between customers of the same company.
You will need to read a few policies (urgh… not a very exciting prospect right?!), full of jargon words. But it is important to know what you are buying when it comes to insurance. The wrong policy is just wasted money.
Top Tips for House and Contents Insurance
Sum Insured vs Total Replacement Policies for House Insurance
If you (or the bank) own a house, you should have building cover. Most Building policies are either ‘sum insured’ policies or ‘total replacement’ policies.
If you choose a ‘sum insured’ policy, you will need to nominate a dollar value to completely repair, rebuild and replace everything. Do make sure that the sum insured is within the right ballpark. You don’t want to under insure, but you also don’t want to be way over insured as this will hike up your premium.
Head over to this handy calculator to check whether your ‘sum insured’ value is within the correct ballpark.
Total replacement policies will pay whatever it costs to repair, replace or rebuild (taking into account any policy exclusions). In some cases, you may pay a premium for replacement policies, as you are removing the risk of under insuring.
Know what is covered and what isn’t. All policies are not created equal!
I highly advise reading through your policy document to see what is included and excluded from your policy. If you know you are in a bush fire prone area for example, ensure that this is included in your policy.
I like this Choice guide for explaining a lot of the jargon that you might come across in your policy.
For Contents insurance, ensure that the coverage reflects the amount it would cost you to replace each item in your household. I personally only consider items I would actually replace in the case of loss or theft. No point including the value of an art work I wouldn’t replace, or jewellery that has sentimental value more than anything.
Be aware that for contents insurance, your policy will often have limits for certain sub categories like jewellery. You may need to have items separately listed and valued. Again, read the policy.
Check out some reviews of your insurer or potential insurer.
This may give you some idea of what they are like to deal with in the event of a disaster or a claim. Budget providers might give budget service! Not what you want when your house burns down!
When I did this exercise myself our insurer had quite a few negative reviews. But having been with them for many years now, and having made three different claims over the years without any dramas, I was happy to stick with them for now.
How to Save on Your Policy
1. Get three quotes minimum. While this sounds painful, you can see MASSIVE differences in premiums. So try to do this every year as a sanity check to make sure your current provider is offering good value. And make sure that if you switch providers, your new policy is suitable both in terms of sum insured AND coverage of the policy (that means reading the policy!).
2. Look at the excess on the policies. A small increase in the excess has a big effect on your premium.
3. Are you covered for services you don’t need? Perhaps you added portables cover for something you don’t use any more or listed an item that you no longer own. Remove them from your policy.
4. Are you over-insured? With contents insurance, insurers tend to up the amount you are covered for each year automatically. Reassess your own situation each year and decide. In addition, why not consider if you would replace a given item if it were stolen or destroyed. If not, perhaps it is not worth insuring.
5. Ring and ask for a discount. Sometimes it is as simple as that… often if you don’t ask, you don’t get!
I did a ‘sanity check’ by getting a few quotes from other providers. Our current deal looked pretty good. So I called our current insurer, lowered our contents insurance coverage, removed portables cover (for jewellery we rarely wear and wouldn’t replace) and just by asking, received a ‘loyalty’ discount.
How long did it take me?
Less than 2 hours all up – I read our current policies, sought out quotes from 3 other providers and called our current insurer.
Reading insurance policies isn’t overly fun, but I did feel empowered to know what we were actually covered for. And I’m starting to enjoy asking for discounts!
Not much time?
Look at your current policy. Are you paying for services you don’t need? Are you over insured? Is there scope to vary your excess? Or simply ask for a discount!
Total money saved?
(This was unexpected… particularly the ‘loyalty bonus’ that they were happy to throw in).
Have you been following any of my other money makeover posts? Start here if you want to take a closer look how I’ve reached over $3,000 in savings over the past 6 weeks, or join the conversation here on Facebook.
Share any of your wins below!
Here’s to living your rich life! xo