Yahoo News How to save money on car and home insurance as mistake could cost £100s
Brits are being warned not to fall into a trap of paying 40% extra for their car insurance. This can add £100s to bills and has been dubbed a 'poverty tax'.
News comes following research by Which? that found some insurers were charging huge amounts of APR on to montly payments. The rates are similar to the amount charged by credit cards, piling extra pressure onto households as insurance costs soar.
The easiest way to avoid the charge is to pay annually. However, some people cannot afford to fork out such a large lump sum in one go.
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Car insurance premiums have jumped by 56.4 per cent in the last year, according to The Sun. And home insurance premiums have risen by a whopping 40 per cent.
Andrew Hagger, personal finance expert and founder of Moneycomms, told The Sun: "It's hard enough for consumers to cope with soaring insurance costs, forcing many to look to spread the cost - only to find they will be hammered again for the privilege.
"It's grossly unfair and hitting those who can least afford it the hardest." Which? found that 1st Central charges between five per cent and 39.11%. It gives customers a personal interest rate after a credit risk assessment.
The average rate across 27 providers that charge interest and disclosed their rate was 23.37%. A spokesperson for 1st Central said: "We offer a range of APRs from 5% to enable us to provide credit to as many customers wishing to pay monthly as possible, including those with low or poor credit scores. Over the past quarter less than two per cent of customers paid our highest APR."
For home insurance, the highest rate in the Which? study was from Co-op Insurance. Which? found that customers pay between 31.31% to 34.75% APR on monthly payments.
A spokesperson for Co-op Insurance said: "Our insurance partner, Markerstudy Distribution, performs regular benchmarking on the rates of credit they offer to our customers. This benchmarking has led us to review these rates and we are looking to reduce them."
A spokesperson for the Association of British Insurers (ABI) said: "Paying premiums by monthly instalments is an option [insurers] offer to help customers manage their budgets. The cost of premium finance is one of a number of topics we continue to discuss with our members and the Financial Conduct Authority."
How to save money on car insurance
Tweaking your excess is an easy way to lower your car insurance premium.
Certain jobs are seen as more risky than others for insurance purposes. Making small but accurate changes to your job title can save you money. For example, swapping your role from "chef" to "caterer" can save you £20, comparison site GoCompare found. But lying about your job could invalidate your policy so make sure any changes are legitimate and accurate.
Shop around when you're looking for a renewal quote. Not all comparison sites have the same range of insurers, so to get the best price, it’s a good idea to check two or three from Go Compare, Comparethemarket, MoneySupermarket and Confused.com.
How to save money on home insurance
Check the comparison websites like MoneySupermarket or Confused.com.
Everyone should get their contents covered irrespective of whether they own or rent. This helps protect your possessions if anything happens to them. It covers your clothes, gadgets, furniture, and, in some policies, jewellery. It's wise for those who own a freehold home to also take out building insurance too. This protects your actual bricks and mortar, walls, windows and roof and covers the rebuild costs if a fire destroys your home. Many insurance companies offer these two aspects of cover combined, so if you’re only after contents insurance, ensure you don’t pay more for what you don’t need.
Your insurer will want to know about the security you have at home when calculating your quote. Functional burglar alarms, security lighting and lockable windows make your home less susceptible to burglaries and having to make a claim for stolen or damaged belongings. These security items will work in your favour and get you cheaper prices, so make sure you’re burglar-proofed. Insurers will also ask about the types of door locks you possess, so make sure you declare the correct type or risk invalidating your cover.
Renewing your home insurance sooner rather than later could save you some cash. New cover becomes more expensive the closer you get to the renewal date. Set a reminder in your diary for 90 days before your policy renewal date to find the cheapest quote, as you can lock in a deal from then onwards. However, analysis by MoneySavingExpert.com, shows that the cheapest time to get new quotes is 21 days ahead of renewal. Do this, and you could save over 20 per cent compared to leaving it until the last minute.
