Save money on home, car and life insurance as premiums spike

As the cost of protecting your assets and your life climbs sharply, money experts share tips to trim spending while staying covered.

Insurance has been one of the fastest-rising household expenses of the past 12 months, but luckily for consumers it also offers some of the biggest potential cost savings.

The latest Consumer Price Index figures show insurance prices climbed 14 per cent in the year to June 30, the sixth-biggest rise among almost 100 expense items measured by the Australian Bureau of Statistics.

Whether it’s home or car insurance, health insurance, or life cover and other personal protection, money specialists say there are several ways to save. Rule number one, they say, is to compare premiums, because a similar policy may be hundreds of dollars cheaper at a different insurer.

While many Australians are underinsured, some are over-insured, continuing to pay for policies they no longer need as their growing wealth gives them an ability to self-insure.

Comparison website iSelect’s spokeswoman, Sophie Ryan, says reasons behind insurance’s big recent rise includes more extreme weather events, high labour costs and rising prices for parts and repairs.

Older Australians may be able to dial down their life insurance to save money. Picture: iStock

“When you get your renewal notice … this should be your prompt to review your policy rather than simply auto-renewing,” she says.

“Make sure it’s still offering good value and consider whether it’s still providing you with a suitable level of cover. Policies can change over time so it’s always worth taking a few minutes to compare your options.”

Health insurance

Ryan says iSelect calculated that the average customer who switched health insurance providers in the past two years saved almost $450.

“When it comes to health insurance, generally the higher the excess or co-payment you are willing to pay, the lower the premium,” she says.

“So, if you think it’s unlikely you’ll be admitted to hospital in the near future you could opt for a higher excess on eligible policies in exchange for lower overall premiums.

“Take a look at your Extras cover … Ask yourself if you even need extras? You could consider flexible products that combine your separate extras limits into a single annual limit for you to use across different services.”

Home, contents and car

Loyalty is not rewarded by insurers, so shop around, Ryan says.

“Providers may offer better rates to attract new customers than what are available to existing customers,” she says.

“Some insurance companies may offer you lower premiums if you opt for a higher excess.”

Sort My Money founder David Rankin says consumers can consider bundling their insurance policies with a single provider to pay less overall.

“Diarise the annual renewal dates of your various policies and make these deadlines your prompt to search for better deals each year,” he says.

“If you are driving less because you are working more from home these days, ask your car insurer about restricting the kilometres on your policy in return for a better deal.”

Life insurance

Life insurance comprises term life cover, income protection, total and permanent disability and trauma insurance, and Rankin says people should be careful not to underinsure themselves.

“If you go as low as you can on the amount you are covered for, you can create a long-term cost by doing so,” he says.

Marcus Reade-Brown, a financial planner at dmca advisory, says people should check that they have not doubled up on life cover and are paying too much.

“For example, if you have more than one superannuation fund you may have accepted the default cover in each superannuation fund, as well as have a life insurance policy outside of your superannuation,” he says.

Australians are generally underinsured, but some have too much cover. Picture: iStock

“Review the amount you are insured for each year, as circumstances can change. For example, if one or more of your children have finished school or are no longer living at home, your ongoing income needs are likely to reduce, therefore you may be able to reduce the level of cover.”

Too little or too much?

Reade-Brown says Australians as a whole are generally underinsured, particularly younger people who do not consider its importance.

“Older people, on the other hand, are often over-insured as they continue to renew the insurance each year with the level of cover automatically indexed to CPI,” he says.

“As people get older, the amount of life insurance they need should usually decrease … the amount they owe on their mortgage decreases with age.”

Australian Retirement Trust acting chief of retirement Anne Fuchs says it is important to ensure you have the right level of life insurance.

“If you have too much insurance it can erode your account balance,” she says.

“I think people do actively need to pay attention to what insurance cover they have. You can be under or over-insured, and neither of those things are good.”