Save money on insurance - this week’s Money Tip without the BS (boring stuff of course!)

Insurance is one of the expenses that we just love to hate.  Unfortunately insurance is also one of life’s necessities.   Following are some suggestions on how you can save on premiums:-

Review your insurances annually. Insurance companies are very clever at finding ways to make sure you pay the premiums on time and often.

Pay by the month is a great way to manage the budget, but I suspect the insurance companies also know that we probably won’t check on them until the budget is really tight. 

Now, I want you to be honest with yourself.  Have you bothered to make the effort to work out your annual premiums or done a comparison to ensure you are getting a good deal.      www.ratecity.com.au is a good starting point.    To make things a little easier for you, you might like to use this very basic excel spreadsheet to collate your list. insurance-summary2

You will make big savings if you ask for exclusions, increase your excess or pay with pre-tax dollars, for example,

motor vehicle insurance - Assuming you don’t have the kids driving the famly car, I saved money by excluding drivers under 30.  Just don’t forget that your policy has this exclusion before you lend the car to anyone.   Could also be a great way to make sure the kids don’t drive your car.

home and contents - I have gone for the maximum excess, only because I am betting that it is unlikely I will need to make a claim (my glass was obviously half full when I did it!)

income protection insurance - if you increase the waiting time before you claim, the premium gets a lot cheaper.   We have a three month wait on our income protection insurance which pays until age 65.   It saved me around 30%.  However, make sure you have a buffer in your savings or mortgage offset accounts.  Also means you might be able to afford higher amounts of insurance.  For your information, income protection is generally tax deductible.

health insurance -  iselect* is a great website to compare premiums and will help you switch funds.   I have a $500 excess which has saved me a fair bit.  There are also policies which allow you to exclude certain services e.g. maternity.  Obviously, if you are a male or not planning to have a baby when you don’t need it.  Another website is privatehealth which is funded by the government.

purchase life insurance within your superannuation fund. Particularly helpful if the budget is really tight and you can’t afford insurance because the premiums are being paid by the amounts that your employer has contributed on your behalf (the 9% super guarantee) or, perhaps you are salary sacrificing.   These contributions are remitted to your superannuation fund with pre-tax dollars.  As an example, if your tax rate was 41.5% and the premium was $1170, your pre-tax saving would be $830 or $486 after tax (this is a huge saving).  Same insurance, just different tax structure.  However, there are some traps.   Attached is a terrific document that MLC has published, which I recommend you peruse.   You will find all the information on this tip in this booklet - strategy 5 - purchase life insurance and TPD (total and permanent disablement) insurance tax effectively.  wealth-protection-strategy-guide-mlc-08



Insurance is crucial,  but common sense must prevail.   If you added up how much you are paying to insurance companies you would probably be in shock.

Remember, if your hard earned money is going to insurance companies (and helping their bottom line), it is not being directed towards your mortgage and other savings, such as retirement.      If you can save 10-20% on the total, it is worth the effort.

Before you cancel anything, it is very important you have fully analysed your own individual needs and circumstances.  For example, you wouldn’t cancel life insurance if you have recently been diagnosed with a illness as you might find it difficult or impossible to reinstate it.

If you have discovered your own great ways to save money on insurance, I would love to hear from you.   If you need help don’t hesitate to contact me.

Now…. when you close this page, go and dig out all your insurance policies and start comparing.  Remember, apathy is our biggest expense.

Cheers

Josie Kay

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YOU MUST READ THIS: Don’t forget that the above information is general in nature and not specific to your goals and objectives. It is recommended that you seek personal financial advice specific to your needs.

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