This is part one of a three-part series on insider tips and tricks to combat the escalating cost of insurance while still keeping you and your family protected.
Between home and contents, car, life and total and permanent disability, income protection and health insurance, insurance cover is probably the next-biggest category of spend for every Aussie, and their price increases are causing stress on already-strained household finances.
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But, while it might be tempting to ditch the cover altogether, this is not the time to leave yourself vulnerable. In part one of this three-part series I’ll start with insurance to replace and repair your most valuable physical asset: Your property.
Safeguarding the roof over your head
Thanks to a huge spike in the cost of building and construction materials, and a spate of natural disasters pushing up labour costs, home rebuilds are – quite literally – through the roof. Across Australia, there have been nine major weather events since March 2022 and almost 788,000 claims lodged as a result of flood and storm disasters in the past three years, costing insurers a staggering $12.3 billion.
Since 2020, almost one in every 25 Australians has made a claim due specifically to extreme weather, and it’s why premiums could increase by a brutal 20 per cent this year alone.
Here’s ‘how’ to cut your insurance premium cost, without cutting it out.
Step 1. Up your excess
This is an effective lever to pull to reduce your premium for any type of insurance. But what many people don’t know is that when it comes to your home, you may well have three different excesses, for:
1. Specified valuable
These are the items of worth that you want covered outside the home, such as rings, laptops and phones. The excess to pay if you make a claim might be, say, $100.
This is what is in your home, which will be a separate segment of your insurance. This excess could be, maybe, $600.
The category that covers damage to the structure itself should also come with legal liability, if someone is injured on your property or because of you.
It is essential to check every year that you are insured for enough to rebuild your property if it were completely destroyed. For example, I just had to up my ‘sum insured’ due to those far higher construction costs. Some insurers offer a rebuild 'safeguard' or 'safety net', so add up to 30 per cent to your sum-insured amount.
But be wary of exclusions because these could traumatically cancel your insurer’s obligation to pay anyway. In any case, your building excess could be as little as $200.
Here’s the thing: splitting the ‘risk’ with the insurer by opting to personally pay more, significantly cuts your monthly premiums. By doing so, you may have to cover the cost of relatively minor incidents yourself – for example, a picture falling off the wall and going through a window. But if your home is destroyed, it will be rebuilt for just $2,000.
You might decide this risk on the smaller damage is worth the big monthly saving. Just be aware that you will probably only be able to change your excess once a year, so you’re committed for that long.
Step 2: Check your optional extras
With insurance, there are always ‘need to haves’ and ‘nice to haves’. There are a lot of questions, policy options and extras when you buy insurance that may not, ultimately, be worth what you pay for them.
Two to consider are:
1. Motor burnout
This is often offered for items that break, such as air conditioning, pool pumps, and contents items that give up the ghost, like white goods or TVs. Be acutely aware this usually only covers items under 10 years old. Is this still relevant for you?
2. Accidental damage
This add-on might cover anything that accidentally damages your home. Two real but bizarre examples are: A son walking downstairs with Weetbix and tipping the bowl on expensive new wallpaper that was waiting to be put up. Or an elderly gentleman overbalancing while putting on trousers and landing painfully, and expensively, on a fancy mirror. The excess is often the same as for contents, the repair bill could be significant, but is it worth it?
Step 3: Ask for a discount
I recently spent an hour on the phone with my insurer doing a ‘health check’ on my policy and, at the end, without me threatening to leave, the phone consultant said: “Let me just see what discretionary discount I can apply.”
It was more than $500. So if they don’t offer, ask. And if they still don’t offer anything, you can always switch to a more competitive deal.
In part two of this series on insider tips and tricks to combat the escalating cost of insurance, I’ll discuss how you can drive down the cost of your car insurance with smart navigation.