Martin Lewis: The end of cheap car and home insurance?

Martin Lewis warns viewers about drastic car insurance changes

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From January 1, 2022, the financial services regulator’s new insurance rules mean insurers will have to prove, on aggregate, that they charge new and existing customers the same. The aim is to end the loyalty penalty.

But… firms are unlikely to just cut renewals to match newbies’ prices

My best guess, based on similar past change, is firms will drop existing customers prices somewhat, but also increase new-customer rates – so they meet in the middle.

And while the new regime officially starts in January, as it’s a big job, insurers will likely start to shift pricing algorithms sooner – so the clock is ticking.

You can switch even if not at renewal

Having analysed over 70 million quotes, the sweet spot to check if you can get cheaper prices elsewhere is 23 days before your renewal for car insurance (21 days for home insurance).

Leave it later and car insurance prices can rise 50 percent (20 percent for home insurance) because insurers rate those who leave it to the last minute a higher risk.

Yet if your renewal is further away, say six months, because of the rule change coming, it’s worth checking now anyway if you can cut costs.

If you find a substantially cheaper policy, just cancel your existing one. Provided you’ve not claimed or reported an incident this insurance year, you should get a pro-rata refund minus a £50ish one-off admin fee (do check first) which you should factor into any ‘will I save’ calculation.

And bear in mind you might not earn this year’s no-claims bonus.

If you find a substantially cheaper policy, just cancel your existing one. Provided you’ve not claimed or reported an incident this insurance year, you should get a pro-rata refund minus a £50ish one-off admin fee (do check first) which you should factor into any ‘will I save’ calculation.

And bear in mind you might not earn this year’s no-claims bonus.

How to find the right policy for less

I’ve listed quick steps below, though to do it properly, you can find far more detailed help and options in my full guides at www.moneysavingexpert.com/insurance.

Always use more than one comparison site. Sites such as www.confused.com, www.comparethemarket.com and www.moneysupermarket.com are insurance marketplaces – they may have different prices for the same insurer. So for the widest comparison use at least two, and more if you’ve time. Plus:

  • Remember to check www.directline.com which isn’t on comparison sites.
  • If you’ve more than one car in the household, multi-car insurance can win. Providers include www.admiral.com, www.aviva.co.uk and www.lv.com.

Yet if you already have multi-car then first look at individual policies via comparison sites – the opposite to what you’ve got can work out cheapest due to new customer incentives.

Ensure you’re getting the right policy. Always check that the cover is suitable for you and whether you need any add-ons.

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With car insurance, there are some savings which seem counter-logical – they’re a matter of trial and error:

  • Don’t assume third party is cheaper than comprehensive. The act of selecting a higher level of cover cuts costs for some as insurers perceive you as a lower risk.
  • Adding a responsible second driver (like a parent) can bring down your average risk level (not as a first driver though as that could be fraud).

With home insurance, the level of cover is key:

  • For buildings, don’t over-insure: you only need to cover the cost of rebuilding your home if it were knocked down, not the purchase cost. There’s a calculator at abi.bcis.co.uk.
  • For contents, don’t under-insure: if you only insure half the value of your stuff, you may only get half the pay-out if you claim.

Don’t pay monthly. It’s usually just an expensive loan. If you can’t afford to pay in one go, you may be better off paying with a zero percent credit card (see www.mse.me/interestfree). Just don’t borrow more and clear within the year.

Check cashback sites or use their comparisons. Sites such as www.topcashback.co.uk and www.quidco.com give up to £40 if you buy a policy through their comparisons.

Alternatively, if you find a cheap price elsewhere, check if you can get the same price buying through a cashback site, and you could get up to £70 on top. Always see the cashback as a bonus though, sometimes it doesn’t track or isn’t paid out.

Martin Lewis is the Founder and Chair of MoneySavingExpert.com. To join the 7.5 million people who get his free Money Tips weekly email, go to www.moneysavingexpert.com/latesttip.

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