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Six simple tips to lower your home insurance premiums

As Queensland cleans up after heavy rains, Australian homeowners waste no time reviewing their homes and their roofing.

A survey by comparison site Compare the Market found that bad weather prompted more than one in four homeowners (27%) to take a closer look at the protection offered by their cover.

“Most people don’t think about their insurance very often, if at all, so just under 30% is actually a pretty high number,” said Stephen Zeller, managing director of insurance at Compare the Market.

But as insurance premiums rise, Compare the Market found that one in five homeowners (18%) cannot afford cover at all.

Mr Zeller stressed that when disaster strikes, it leaves people “on their own to recover”.

Already, the consumer watchdog ACCC says residents of cyclone-prone northern Australia can face annual home insurance premiums in excess of $5,000, well above the average of $1,400 in the rest of the country.

the Insurance Council of Australia confirmed that the March 2022 floods were the costliest disaster on record, with insurance claims totaling $3.35 billion.

This should drive up premiums – and not just for those in flood-prone areas.

the Australian Housing and Town Planning Research Institute notes that homeowners in other areas may face premium hikes as insurance companies try to recoup losses.

Relief could be in sight for northern Australians, with the establishment of a federally funded $10 billion cyclone reinsurance pool.

It has the potential to reduce premiums by up to 58% from July 1, but only for homeowners in cyclone-affected areas.

The result is that homeowners elsewhere have to find their own savings – and a few simple steps can make the cost of coverage more manageable.

1. Shop around for a better deal

Rather than just handing over cash at renewal time, take the opportunity to seek out a lower premium.

“There could be hundreds of dollars of difference between the cheapest and most expensive insurance policy on the market – even when you provide the same information to insurance companies, Zeller said.

2. Pay and buy coverage online

Insurers are hungry for new business. They also want to save on labor costs.

You should be able to get a decent discount – usually 10-15% off the first year’s premium by arranging and paying for a new policy online.

3. Insure the building – not the land

Insurance only protects the value of your home and its contents, not the land it sits on.

After all, the block itself will still be there, albeit slightly less worn, even after a flood or bushfire.

Zeller advises checking that the “sum insured” reflects the value of the building(s) and not the land. Otherwise, you could be significantly overinsured and face an equally exaggerated premium.

4. Lift the excess

The higher a policy’s excess payment, the lower the premium.

as a guide, it can cost $1038 via AAMI to insure a three-bedroom home for $400,000 if you select a $1,000 deductible.

Raise the deductible to $3,000 and the premium can drop to around $838, a savings of $200.

The catch is that it becomes unprofitable to claim the cost of any damages costing less than your chosen deductible.

5. Pay annually

Paying premiums monthly may be easier on your cash flow, but it’s not always a money saver.

Mr Zeller said: “You can often save money by paying a flat annual fee instead of monthly premiums, as well as avoiding some administration costs.”

6. Consider increasing construction costs

The level of coverage you have in place should not be a fixed and forgotten figure, especially if you have recently completed major renovations.

Construction costs jumped 9% in the 12 months to March 2022the highest annual growth rate on record (apart from 2001 when the GST was introduced).

This means your home can be insured for less than it costs to rebuild – and you may not know until disaster strikes.

Many insurers have construction cost calculators on their website to help homeowners accurately assess their home and its contents.

Understating the value of your home to save on premiums could be a costly mistake if you have to make a claim.