When did you last change your home insurance provider? If the answer is more than a year ago, you’re most likely paying a ‘loyalty penalty’.
So with winter coming and it being the most important time to have good home insurance in place, our Money Saving Expert Martin Lewis is here with his system on slashing the cost of home insurance.
Home insurance is one of the prime areas where companies use what is called ‘price walking’. This is where each year if you stick with them they walk the price up and up and up – never too quickly, to easily raise the price. After the first year you may pay £25 more than needed, but by year five it can easily be 50% or more.
Many people who have stuck with one provider find that if they apply to their own insurer as a new customer it can be £100s cheaper. Like Miss Magneto tweeted: “@MartinSLewis Home insurance gone up to £258 disgraceful.... Used a comparison site and the cheapest at £147 was my current company ... Great”. And Christopher tweeted “@MartinSLewis Just compared and saved £1,300 on home insurance compared to @DirectLine_UK renewal quote!! Yes saved £1,300.00”.
So it’s crucial that every year you don’t simply stick with your current home insurer. It may be the cheapest, but that’s rare. So ensure you find out if you’re massively overpaying, full help on that in Martin’s full ‘Cheap Home Insurance’ guide, but here are the key points...
Step 1: Define the right cover
There are two elements to home insurance: buildings and contents cover. An easy way to work out what’s covered is to imagine you can turn your home upside down: everything that stays put is buildings, if it falls, it’s contents.
With buildings insurance, which is only usually needed by freeholders, some people tend to make the mistake of over insuring. You only need to insure the rebuild cost – so how much it would cost to rebuild your home should it get knocked down – not the market value (the amount it might sell for). To find your rebuild value, there’s a free calculator the Association of British Insurers.
With contents cover, don’t underinsure thinking you’ll never claim the full amount. If you do underinsure, it could mean you’re then paid less when you go to claim. And you often have much more than you think, there’s a useful calculator to help at Direct Line and the AA.
And go through all the details of things that can make your house safer. Remember insurance pricing is based on a risk assessment, a huge variety of things can impact them.
Step 2: Don’t just use one comparison site – combine them
Comparison sites are a quick and easy way to find cheap quotes if you’ve relatively normal circumstances.
Yet in truth they’re not actually comparison sites, they are marketplaces, as they can have special deals and prices with different insurers (as long as they’re not more expensive than going direct).
So the best thing to do is to combine a few of them to get a wide spread of insurers and prices. You can simply open a few windows at a time and put the same information in different ones.
Step 3: Then check insurers that comparison sites miss
Two of the big insurers, Aviva and Direct Line are not included by comparison sites, so check them too especially when they have discounts. For example right now Aviva is giving 20% off online, so check if this is cheaper.
Comparison sites also tend to miss out special promo deals that insurers offer, so it’s worth checking out if there are any of these as well (they’re listed in martin’s guide linked above).
Step 4: If you want to stay where you are, haggle
Once you’ve found a cheaper policy – you can always try taking the price to your existing provider and ask them to see if they will match it – they often will. For example, in a recent poll I did, 76% of customers who haggled with Direct Line said they had success, while 89% did with Admiral and 75% with Hastings Direct. So it’s worth a try.
Step 5: If you’re switching, once you know what you’re getting, check for cashback
Once you know your cheapest policy and crucially you’ve checked IT’S RIGHT FOR YOU, then check if you can earn cashback using a cashback site such as Topcashback or Quidco – these sites pay you if you click through them.
This usually works, but there can be tracking issues, so always ensure you’re getting the right policy. See this as a likely added bonus. If you’ve got time and your top three policies are all much of a muchness, it can be worth seeing the cashback on offer for all three. Yet see this as the icing on the cake rather than as a core part of it.
Some people can be paid to get home insurance
Some who follow the full system, to maximise savings have even on occasion found that the cashback is bigger than the policy cost. The all time record is from 2007 with a £52 policy and £120 cashback, and more recently Ian emailed in 2016 saying “I have paid £32 and I have £55.55 cashback confirmed, so I should have £23.14 profit.”