Cutting the cost of your house insurance

March is always an expensive month for us, with car, house, contents and boat insurances all falling due in the month.

With our house we have full replacement coverage, rather than an agreed amount coverage, so that if the house is destroyed then the policy will cover rebuilding to the same standard, regardless of building costs.

We have had this coverage for many years, thinking it is the best way to go so we don’t have to try and estimate its replacement cost and work out a new agreed value every year.

This year, like most insurance policies, our house and contents insurance premium went up significantly – by 33%. Ouch! 

So rather than just accepting this I got another quote. This quote was slightly more expensive.

I then looked at the impact of the excess on our current policy renewal, and was quite surprised to see the result.

We have had an excess for the house insurance of $1,000 for many years and hadn’t looked into changing it.

With our insurance policy we could vary the excess and thus change the premium. This is the result for different excess amounts.

It is quite clear from this table that the lower the excess you select, the higher your premium will be.

At the top and bottom end of the table each change in excess only made a small difference to the premium. But at the middle of the table an increase in excess could make a big difference to the premium.

In our case we increased our excess from $1,000 to $2,000 – this reduced our premium by $654.

It really made sense to increase our excess, in less than two years we will have saved the extra $1,000 in excess we would have to pay if we made a claim. Image what impact this would have over many years. Most of us rarely, if ever, make a claim on our house insurance, but we are willing to pay the premium “just in case”, so we should consider having a high excess if it reduces the premium significantly.

The moral of the story is – when its time to pay your house insurance, find out what happens to the premium if you take out a higher excess. 

PS: I did the same exercise for our contents insurance, but the difference in premium for higher excess amounts was much lower than for the house insurance so I didn't change it.