With the cost of living rising, Australian households are looking for more ways to cut down their everyday bills.
Just like with your health insurance and utility bills, there are some simple things you can do to cut the cost of your home insurance, says CHOICE insurance expert Daniel Graham.
Here's where to start.
On this page:
- 1. Shop around
- 2. Consider increasing your excess to $1000–1500
- 3. Avoid the loyalty penalty
- 4. Look for discounts
- 5. Consider paying yearly, not monthly
- 6. Make sure you have the right level of cover
1. Shop around
If you've been with the same insurer for more than 24 months, Daniel advises first calling your insurer to ask them if you can get a better deal.
Then, get quotes from at least three other insurers to compare and find the best value – some will match or beat competitors' premiums. And new customers often get a discount to sweeten the deal.
A good place to start with your research is the CHOICE home insurance review. We've compared more than 50 different home insurance policies from across the market to help you find the right cover for your building and contents.
We've looked at home and contents policies offered by all the major insurers, including NRMA, GIO, QBE, Budget Direct, Youi and more, to help you figure out which one is right for you, including giving them a price rating which indicates, on average, how expensive a policy is compared to others.
And unlike other insurance comparison websites, we're completely independent and don't get paid by any of the insurers we're comparing.
How much can you save?
Shopping around can save you thousands of dollars. The difference between the cheapest and most expensive quotes for the same scenario range from $1010 in South Australia to $4665 in New South Wales.
Here are the potential savings you can make for insurance on a house with a sum insured between $600,000 and $700,000:
- Australian Capital Territory: $2265
- New South Wales: $4665
- Northern Territory: $3250
- Queensland: $1870
- South Australia: $1010
- Tasmania: $1540
- Victoria: $2575
- Western Australia: $1230
2. Consider increasing your excess to $1000–1500
The excess is the amount you need to pay towards a claim before your insurer will cover the rest. A higher excess can result in lower premiums, as it may mean you make fewer claims overall.
For example, if you have an excess of $500 on your policy, this is the amount you have to pay when making a claim.
With a $500 excess, it makes sense for you to make a $1500 claim. But if you increase your excess to $1500, you would only make claims that are higher than that amount to make it worth your while. The insurer therefore charges you less, as you're likely to make fewer lower-value claims.
Having an excess of between $1000 and $1500 seems to be where you can get the best savings
Daniel Graham, CHOICE home insurance expert
"Generally speaking, your premium goes down around 10% for every $500 increase to your excess," says Daniel.
"Having an excess of between $1000 and $1500 seems to be where you can get the best savings. We've found there are diminishing benefits to increasing your excess much above that.
"Some insurers offer very high excesses around the $5000 mark or higher, but those levels seem to be there for people who live in places at high risk of natural disaster, where home insurance is already very expensive and people need to bring down their premiums any way they can."
3. Avoid the loyalty penalty
New customers often get cheaper premiums than renewing customers, as insurers offer discounts to attract new customers while keeping customers who have been with them for years on the same rate.
"We call this the loyalty penalty," says Daniel.
"It simply means that if you haven't switched insurers for a while, you're likely missing out on savings. If you're willing to put in the effort you could theoretically change your insurer every year or so to keep getting the first year discount."
Simply check your renewal price against your current insurer's online quote calculator. If the price is lower for a new customer, call and ask them to match the lower price.
4. Look for discounts
Many insurers offer discounts for things such as installing security systems, having a good claims history, or if you're working from home a lot.
Bundling your home insurance with the provider of your other insurance – your car insurance, for example – can also reward you with a discount.
But, make sure you read the details of the policies carefully, warns Daniel.
"You'll need to make sure the policies will suit your needs – you don't want to get discounted home and contents cover just to end up with a dud car insurance policy," he says.
5. Consider paying yearly, not monthly
You can also get a discount by paying your premiums annually instead of monthly.
"Some insurers charge you more to pay by the month, which means you could be paying 10–25% extra each year. Some insurers charge a flat fee for paying monthly, although most simply tack on a percentage of your premium as the penalty," says Daniel.
Some insurers charge you more to pay by the month, which means you could be paying 10–25% extra each year
Daniel Graham, CHOICE home insurance expert
In any case, if you currently pay monthly but could afford to pay a whole year's worth of insurance in advance to make savings, call your insurer to ask what the difference in cost would be.
If you can't afford to pay upfront, look for an insurer that doesn't charge fees for paying by the month.
6. Make sure you have the right level of cover
Consider the level of cover you need. Don't pay for coverage you don't need, but make sure you have enough coverage to protect your home and belongings if the worst should happen.
You can find out more about how to figure out the sum you should insure your house for in our home and contents insurance buying guide.
"Regularly review your policy to make sure it still meets your needs," says Daniel.
"If you've made any changes to your home or your circumstances have changed, it may be worth adjusting your coverage."
Case study
"I found out I can save almost $700 a year simply by switching insurers and paying annually instead of monthly" – Pru Engel
While writing this piece on 'How to save on home insurance', I figured I should take a look at my own policy which, I'll be honest, I've never taken a close look at (my partner handles that particular aspect of our household finance).
We recently bought a three-bedroom house in Sydney and, as we have other insurance policies with my state's motoring club insurer and they offer a loyalty discount, we considered sticking with them for our policy on the new house.
Including a loyalty discount, we were quoted an annual premium of $1831.36 or $157.40 per month based on our sum insured for building and contents (with an excess of $1000 for building and $750 for contents).
When I looked into the details, I realised we would be paying slightly more ($55.90 over a year) by opting to pay monthly. It's not much, but that's still money I'd prefer to have in my pocket. So, I checked out the CHOICE reviews to find out which insurers had the best 'price rating' for New South Wales and obtained quotes from them.
Even by keeping the same excess, and opting to pay annually, the quotes I received from two other Big 4 insurers were around $680 less per year (including discounts for signing up online). Seems like an easy way to make some savings to me!
Stock images: Getty, unless otherwise stated.
