Saving on Insurance

The amount of premium you pay for insurance, especially for short term insurance like homeowners insurance, can vary widely. This will depend to a large extent on the insurance company you select, because the experience of risk and claims is unique to each company. Here are some of the things to consider when you’re thinking of saving on insurance.

Increase your excesses

Excess is the amount you need to pay toward a loss you have incurred before the insurer starts to pay your claim. There are mandatory excesses, which are imposed by the insurance company, and voluntary excess, which you agree to shoulder. The higher your voluntary excess, the more money you will save on your premiums.

Combine your house and car insurance

As a general rule, taking out two separate ‘stand-alone’ policies for the house and car will cost more. Because cars are out on the streets daily, they are exposed to greater risk of loss or damage than the house. For this reason, insurance companies prefer to insure higher-risk cars together with lower-risk assets like your house to spread the risks. You will realise significant savings in premiums by consolidating all your insurance needs in one provider. In this particular instance, it pays to place all asset eggs you own in one insurance basket.

Make the house disaster resistant

Making your home more resistant to natural disasters will lower the risk and may result in lower premiums. The insurance company representative may have some ideas on how you can do this. Reinforcing the roof with better roofing materials or installing storm shutters may help. You can have the plumbing and electrical wiring modernised to minimise the risk of damage from water leaks or electrical short circuits.

Beef up your security measures

It is possible to get discounts if you make improvements to the security of your home. There may be credit for installing burglar alarms, smoke detectors or dead-bolt locks. You may get even bigger discounts for putting in an elaborate sprinkler system. Many of the sophisticated systems don’t come cheap and not all of them qualify. Once again, you can ask the insurer’s representative to find out what sort of systems are acceptable for discounts and for an idea of how much they would cost. They should be willing to help you out on this because it reduces their risk.

Stick to an insurer

If you have bought insurance from a company for many years, it is likely they will reward you with discounts for having stayed so long. It pays to ask your insurance agent. The rate of discount could increase as you stay longer with the same insurer. But this should not preclude you from periodically checking the price of your policy with equivalent cover from other insurance companies.

Consider insurance cost when buying a house

It is possible that you will pay lower premiums if the house you decide to buy is in an area that insurers consider being less risky to them. In addition, a house with plumbing, heating and electrical installations not more than 10 years old may pose less risk to an insurer. Brick houses are more wind resistant and are thus your best choice in a place often exposed to windstorms. Wooden frame houses are more flexible and tend to withstand earthquakes better. You’ll have to choose wisely, but doing so could reduce your premiums significantly.

Remember the price of your house is not equivalent to rebuilding costs

When you bought your home, you paid for both the structure and the land on which it stands. But there is no need to insure the land, as it is not vulnerable to the perils specified in your homeowners insurance. So there is no point including the land value in the amount of insurance cover you buy; doing so will only raise your premium.

To conclude

Insurers know the cost of insurance is a big concern to most South African families. It constitutes at least 10% of the family budget. They are only too willing to help you take steps to reduce this cost. But while saving on insurance is a real concern, you must also ensure that you obtain all the insurance protection you need.