Take these steps to cut your insurance premiums and you’ll probably save a fortune too.
Monday morning this week I set some time aside to look at all the insurance our family is paying each year. I was inspired by articles like this one and this one. On the one hand, I wanted to make sure we were adequately protecting our investments. Our property, cars, health and each other (because isn’t that what life insurance is?).
On the other, I didn’t want to pay a cent more than I had to.
By lunchtime, I had saved a massive $5,416.78 and apart from the research and number crunching, it took just three phone calls to do it. I didn’t even have to wait on hold for long (selecting the “cancel your policy” option tends to get things moving). It was the most lucrative morning I think I will ever spend.
So I thought I’d share exactly what I did on Monday because you might be able to cut your insurance as much as I did. Definitely worth a try, right?
What not to do
We were paying way too much for our insurance for way too long. It was one of those things that languished in the “get around to” basket year after year. That basket holds a lot of shame and regret. I know your basket does too.
I’m telling you about the Basket of Shame because you need to know that there was a lot of money just waiting in there for me to take back. You may not have been so neglectful and therefore won’t scoop $5k. But I guarantee you’ll scoop something that will cut your insurance bills and make a morning’s work worthwhile.
Your basket may be full like mine if your insurance policies are currently covering any of the following like ours were:
Example: when we bought our new car, we took out a policy insuring it for an agreed value, not market value. Then we essentially never looked at that policy again.
So we ended up with the 16-year-old Subaru our son drives insured for about ten times its market value. I mean, Subarus are great at holding their value and they just keep on keepin’ on (ever driven the backroads around Byron? It’s like driving into a herd of Subarus), but that policy was a ridiculous waste of our money for at least 15 years. Cue crying face emoji.
2. Ignoring life events
Note above that we have a son driving. We also have a daughter about to get her Ls (hold me). That’s a significant change to the way our cars are used. Not checking whether our current insurers offered the most cost-effective cover for under 21 drivers was costing us – big.
Another example: we were still paying for obstetrics on our health insurance. My youngest is 13 years old.
Were we waiting to add to our brood in our fifties? Ah, that’s a no.
Or, help me, for teen pregnancy to grace our family? That’s a hell no.
Ditching obstetrics cover was loooong over due.
3. Keeping excess too low
A further issue was that the excess on all of our policies – home, contents, cars and health – was set at the lowest possible amount.
Probably an amount we could afford 16 years ago, if the Subaru example is anything to go by.
Having a healthy emergency fund these days means we could afford to up the excess on each of our policies considerably, saving a significant amount on the annual premiums as a result.
4. Paying premiums monthly
On most of the policies I researched, you could save a massive 20 per cent of the cost of your insurance if you paid annually rather than monthly.
Guess who was paying monthly for every single policy we hold? Sigh.
5. Ignoring lifestyle changes
We renovated our house three years ago and changed exactly nothing on our home insurance policy.
The car I drive was insured as if I was commuting into the city during peak hour seven days a week. I’ve worked from home for 11 years.
Should I go on?
I think it’s best I park it right there as I’m sure you’re quickly realising just how easy it was for me to ‘find’ that $5,416.78. It really was like stumbling across gold nugget after gold nugget.
Which would have fine if those gold nuggets didn’t belong to me in the first place and I’d effectively been paying vast sums of money for someone else to store them.
Another good one for saving money: 101 frugal tips to help you live a richer life
Do this instead
Right, so here’s the process I went through to get a better deal on all of our insurance policies. You can use these steps to cut your insurance too.
It officially took three hours on a Monday morning, but it did take us about a week to find the actual policies, so there’s that… Please add “6. Keep your insurance policies somewhere safe” to the above list of what not to do.
1. Work out what you want
Despite spending a week finding our existing policies, I quickly realised that it made more sense to just start from scratch anyway. What did it really matter what our outdated policies were covering?
To figure out what we needed now, I asked myself three questions:
1. What exactly do I want to insure and why?
This was an especially important question when it came to health insurance. Australia has an exceptionally good public health system and so far that’s what we’ve always used. Despite paying for private health insurance my entire working life. Including all three of my children being born under the public midwifery system.
Anyway, despite only ditching the never-used obstetrics cover a mere four days ago, I am getting old now. Once I factored in future health needs and the tax implications for ditching health insurance, I decided to stick with it. For now.
But the lesson here is this: don’t just blindly take out an insurance policy for ‘peace of mind’. Do your homework first or you’re likely to pay more than you need.
2. What can I afford to pay for without insurance?
In other words, set your excess; or even ditch a policy completely if you have enough in your emergency fund to cover the loss.
I ended up swapping the Subaru insurance from comprehensive to third-party property because I realised we could afford to replace such a cheap-ass car without any insurance at all. However, replacing the Porsche Cayenne one of us would be unlucky enough to tangle with was not an option.
3. What’s the minimum insurance I need?
Write down your ‘non-negotiables’ so you make sure you’re covered for them. For example, considering my ‘bare minimum’ led me to significantly reduce the value of what our home contents insurance covers. Instead of insuring to the value of what we have now, I chose to insure only what we would need if we had to start over.
The bare minimum will be different for everyone, but it’s an important value to know. It’s almost like asking ‘what does peace of mind look like to me?’
2. Plug it into a few insurance comparison sites
Comparison sites make it much easier to compare policies and look for ways to cut your insurance. Note that it’s worth using more than one site as each will have different insurers listed with them. Comparison sites work on an ‘insurer pays’ basis, and not all insurers want to pay all sites. If you do a quick check across more than one site, you’ll get a better idea of the best way to cut your insurance. The sites I used on Monday were:
3. Choose the best option for you
It can be quite confusing using the comparison sites because every insurer offers something slightly different to the next.
That might be a higher or lower excess cap, or different coverage. I swear they make it as complicated as possible to cut your insurance and save money. Yep, they do.
This is where your bare minimum list (see ‘What’s the minimum insurance I need?’ above) comes into play. Find the lowest priced policy that covers your minimum. The rest is a ‘nice to have’ and simply not worth paying money for year after year.
After all, you take out any insurance policy hoping like hell you’ll never actually need to use it. Why pay more for it than you have to?
4. Phone the insurer
While it’s easy to just click the ‘buy now’ button on the comparison or insurer website (and many insurers offer a small discount to get you to do that), the more profitable option is to give them a call. Insurance is complicated and it’s worth talking through different scenarios before you buy. You can also negotiate a lower premium while you’re there.
I chose each of the insurers I wanted to talk to off the comparison websites, gave each of them a call, and managed to further reduce each of the premiums by around 10 per cent. That was a much bigger saving than that $50 discount many insurers offered to click the ‘buy now’ button.
5. Pay insurance annually
Try to do this entire exercise at a time when you’re a bit flush and can pay your annual premium upfront. Electing to pay monthly will cost you – up to 20 per cent given my experience on Monday.
By the time I’d cancelled the old insurance policies (receiving a pro-rata amount back as I was paid up until a future date for each) and paid upfront for the new policies, I had saved myself a massive $5,416.78. In fact, the new health, car, home and contents and life insurance policies together cost far less than the amount I was saving.
I effectively saved 62 per cent on what I paid for insurance last year. And that’s an amount I will save every year, not just this one.
I reckon it’s definitely time you grabbed your own Basket of Shame and started unpacking. I promise that if you go through the steps I’ve outlined here, that basket will be empty in no time.