Keep excess-ive home premiums under control in 2011

Opting for higher excesses for cheaper premiums may be a false economy, warns moneysupermarket.com

Homeowners tempted to up the voluntary excess on their home insurance policy in order to cut the cost of the premium may be operating in a false economy, according to new research from moneysupermarket.com

Britain's number one comparison site analysed the cost of home insurance premiums using a range of voluntary excess levels, from £0 to £500, to test the myth that a higher excess means a lower premium.  Overall, the research found homeowners can expect to see a £100 difference in the annual cost of a premium when comparing the average cost of a £0 excess (£252) to a £500 excess (£152), but saving £100 in the short term could mean having to cough up £500 later in the event of making a claim.

The research also found premiums reduce only marginally when comparing £100 excess to £300 - a £4 difference - and reveals opting for a £400 excess will actually hike the premium back up to £209 a year - a 25 per cent increase.

Julie Owens, head of home insurance at moneysupermarket.com, said: "Homeowners are reeling from an expensive Christmas, and coupled with the effects of the VAT hike and the latest inflation figures too, will no doubt be looking to cut household costs. However, saving cash by upping the excess on your home cover might not be a wise move as the research clearly shows increasing your excess may be a false economy.

"It is crucial to only set your total home insurance excess at a level you feel comfortable paying in the event of making a claim. Don't forget that the amount of voluntary excess on a policy is the money you are willing to pay should you need to make a claim, in addition to any compulsory excesses the insurer will add and require you to pay.  So, if for example you had a £100 excess and a £500 claim you would pay the first £100 and the insurer the remaining £400. If you set your excess at £400 however, you would have to pay a lot more upfront."

moneysupermarket.com's top tips for cheaper premiums:

Know the difference between voluntary excess and compulsory excess - Some insurance policies have a compulsory excess which must be paid. A voluntary excess only applies if the policyholder has added it to their policy. Voluntary excess can be used to help reduce the insurance premium. However, people need to be aware that in the event of a claim, the voluntary excess and the compulsory excess together can be expensive.

Think about your cover - Do you really need accidental damage cover? This can increase premiums by 25%. Think carefully about the add-ons you need.

Don't claim unless you need to - The fewer the claims, the higher your no claims discount. So for minor issues that would be inexpensive for you to cover with your own cash, think twice before making a claim.

Change the locks - If you've moved to a new home you never know who might still have a key. It is important to maintain locks. Five-lever mortise locks are recommended for external doors while windows should ideally have two bolt locks.

Install a good home security system - Sometimes there are alarm systems that might be preferred by an insurer. The NACOSS standard alarm can cut premiums with some companies by 7.5%.

Time-switch lights - Your home is more vulnerable to theft when you are not around. Time-switch lights will give the impression that you are at home.

If you are away - Remember to cancel newspaper and milk deliveries and ask someone you can trust to open and close the curtains and collect mail.

Keys - Don't leave them in obvious places such as under a doormat. Also beware of 'hook n crook' thefts - where keys are left so close to a door that a burglar can simply hook them through a letterbox and open the door.

Install security lighting - illuminate your visitors for their safety as well as your own. Unwelcome visitors are less likely to loiter if they're 'in the spotlight'.

Join a neighbourhood watch campaign - this can help to reduce your premium if you inform the home insurance company of your participation in a scheme. It can reduce your premiums by up to 5%.

Avoid frozen and burst pipes - If you think pipes are frozen, turn off water at the valve and header tank to cut down the water that can escape.

Look out for subsidence - One of the most common problems to affect the home but usually covered in your building insurance policy. Look to see the excess level on subsidence and if your garden walls are covered.

Fire - Fit a smoke alarm and take simple steps to avoid accidents. Most fires in the home are caused by smoking or cooking; never smoke in bed, don't leave cigarettes lying around and don't leave cooking unattended. Other fire tips include closing doors at night to contain fires, check the home is safe before going to bed and keep matches away from children.

Don't smoke - As covered above, the fire risk greatly increases if you smoke cigarettes. Most insurers will now ask if you are a smoker.