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Cost of living crisis: Top tips to save hundreds on car and home insurance

·Finance Reporter, Yahoo Finance UK
·6-min read
Top tip Traffic in Beech Street on the Barbican Estate in London, as petrol and diesel cars will be banned from the road as it becomes Britain's first zero-emission street, the City of London Corporation (CLC) said. The city is working with Transport for London on plans for the street to just be used by zero-emission vehicles, cyclists and pedestrians by spring 2020.
Top tip: Haggle to save £50 on your car insurance. Photo:PA

With record high fuel prices making UK households feel the squeeze of the cost of living crisis, many drivers are searching for ways to lower their insurance costs.

The cost of car insurance is now at the highest level seen since the last quarter of 2020. Meanwhile, home insurance prices are also on the rise. Still, there are ways to save hundreds on your annual insurance bills.

Here we share some top tips from consumer group Which? that could save you hundreds on car and home insurance.

Don’t auto-renew and save £49

Drivers who allow their car insurance policies to automatically renew pay £49 a year more than those who switch. MoneySuperMarket found that millions of drivers could be overpaying for their car insurance, at a time when premiums are rising.

Switch provider and save up to £120

If out of contract, or nearing the end of one, customers should consider switching providers to save. Research by Compare the Market analysed both the average premiums and cheapest premiums quoted to drivers, finding that the cheapest quotes rose by £42 in the first quarter of the year to reach an average of £568. It concluded that this means drivers could save up to £120 by shopping around to find a better deal. The savings increase dramatically for drivers aged under 25, who could shave an average of £257 off their premium.

Use price comparison websites – and check the insurers that aren’t on them

There is usually a huge difference between the cheapest and most expensive insurance policies. Before signing up for a new policy, Which? suggests consumers research the best deals available by using price comparison websites to compare different products and make sure they choose the best for their individual circumstances. It’s worth noting that some insurers don't feature on all comparison sites. For example, Direct Line insurance is only available direct and NFU Mutual doesn't sell online at all.

Be realistic about the excess you set

Consumers should ensure they set the correct level of excess on their policy. Setting a high excess might lower premiums, but setting it too high might make claiming redundant or too expensive. For example, a customer making a claim on their car insurance will need to pay both the compulsory and voluntary excess. So if their compulsory excess is £250 and voluntary £500, they’d need to pay £750.

Read more: Top tips to cut broadband and mobile bills

Sometimes opting not to make a claim via insurance and paying for repairs out of pocket could save consumers money in the long term (though they should still inform their insurer of the incident). This is because claiming could incur an excess charge, reduce any no claims discounts and lead to an increase in premiums.

Improve home security for cheaper insurance

Customers are more likely to get cheap home insurance if a provider considers them a "low-risk customer". Before they begin searching for an insurance policy, Which? suggests customers improve their home security by adding deadlocks to external doors and locks on accessible windows, as most insurers have a minimum level of security before they accept new customers. Households might be able to get even better deals by going a step further and installing a burglar alarm or five-lever mortice deadlock.

The consumer group asked burglar alarm owners who also have home insurance whether getting one had saved them money on their premium and 43% agreed that it did.

Pick the right job title

Job titles can affect the cost of car insurance. When looking for the best policy, consumers should check if there’s a choice of labels when entering their occupation, for example describing themselves as a "writer" rather than "journalist" as it can sometimes impact their premium. However, drivers must ensure the occupation they list is an accurate description of their circumstances. Misrepresentation can lead to insurers cancelling the policy or declining to pay claims. Customers should check directly with the insurer if they’re uncertain about how to answer certain questions.

Haggle to save £50 on your car insurance

For those who’d prefer to stay with their current provider, Which? recommends haggling to get a better deal. Customers can use cheap home insurance deals they’ve found elsewhere as leverage with their provider. The consumer group found that customers who haggle pay less than those who don't, and in a recent survey those who haggled reported an average discount of £50.

Reconsider add-ons and save £50

Car insurance add-ons might add as much as £50 or more onto some premiums. Common add-ons can include legal expenses insurance, personal accident cover, breakdown cover, and key cover.

Read more: Top tips: How to save money on fuel costs

Motorists might already have these included with a packaged bank account, while key cover might be included in some home insurance policies. Drivers should consider what they do and don’t need and check the policies they already have to find out what they’re covered for.

Consider getting a black box – younger drivers could save over £1,000

Black box insurance policies, also known as telematics, calculate premiums based on the way motorists drive. Insurers can monitor how well and often motorists drive to give a more accurate price and reward drivers by discounting their premiums. Some insurers also offer policies that charge by the mile, tracking drivers' mileage.

A report by Compare the Market found telematics quotes are cheaper than standard car insurance for 78% of drivers aged between 17 and 20 and 69 % of those aged 21-24. The price comparison site found the average telematics quote for a driver aged 17-20 was £1,811, a saving of £1,137 on the cheapest standard car insurance policy.

It's worth comparing quotes from these providers with quotes from more traditional car insurance policies. If a driver only needs to drive a car for a short time, they should consider getting temporary car insurance, or a policy with a rolling monthly contract that can be cancelled without incurring significant fees.

Read more: 10 ways to cut your commuting costs

Don’t pay for building insurance if renting a property

Landlords should handle building insurance, so renters only need to purchase contents insurance to protect their possessions. While there are specialist short-term insurance policies available, and policies covering a single room, Which? suggests renters compare the premiums and cover levels from renters policies with more traditional contents cover. Leaseholders may also get buildings insurance through their service charge, so don't need to purchase insurance separately.

Watch: How does inflation affect interest rates?

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