Four ways to reduce your premiums
With all the uncertainty in this Coronavirus-mad world, you might be a little bit anxious about the hit to your own hip-pocket.
While positive about the longer-term, I have glanced at my budget app to see if there are items where the cost doesn’t exactly equal value to me anymore (do I really need a Liverpool membership if all their games are cancelled and I live on a different continent?).
I couldn’t help but keep circling back to the items which give me little pleasure to fork out my hard-earned for. Unsurprisingly, they all had a common theme:
- Income Protection Insurance
- Life Insurance
- Total and Permanent Disability Insurance
- Trauma Insurance
- Private Health Insurance
- House Insurance
For what it’s worth, I don’t intend to make any drastic changes to my own insurance policies, but I thought it might be useful for to know why your prices may have increased lately, and some ideas for cutting your insurance costs.
Costs of personal insurance have skyrocketed in the last few years because quite simply, the life companies are losing billions of dollars due to a huge increase in payouts, mainly due to the rapid rise of mental health claims.
If you haven’t spoken to somebody for two or more years, you could be paying thirty per cent or more than you initially had planned. The bad news; premiums are likely to get higher.
Four options to get on top of your premium costs:
Reducing your cover
You might consider covering your most important assets and goals in the event of illness, injury or death as opposed to the full gamut. Luxury goals that you may consider not insuring include; funding private or higher education, paying off investment property debt or extravagant lifestyle costs.
Consider watered-down policy options
We all want our income to continue without delay should we be unable to work due to injury or illness. Hence, the tendency to choose a short waiting period (e.g. 14 or 30 days). However, if you are willing to take a longer waiting period (e.g. 90 days), the insurer is no longer bearing the risk of short-term injuries & illness. As a result, you’re likely to get a significant reduction in premiums.
Other common ways to reduce costs is to move from a level premium to stepped or to choose a ‘standard’ contract as opposed to a ‘comprehensive’ option.
Get a comparison quote
Insurers re-price their premiums based on their appetite for business. Similar to a bank with interest rates, what was a good deal when you first signed-on has been trumped by another provider keen for your dollar.
Fund your premium (or part of) from super
While funding premiums from super has consequences, it can be a great fall-back plan to fix your personal budget pain for a period of time. Most retail insurers will allow you to transfer eligible cover from individually funded to super funded.
While I like the peace of mind of having personal insurance (in particular Income Protection) it does eat into my budget for other things like paying down my mortgage, funding my little fella’s education and growing my investments for retirement.
Reviewing your provider and reevaluating your preferences for expensive policy options like a short waiting period could cut your costs by more than half. A successful review could mean money in your pocket, without leaving you exposed with no insurance.
Personal insurance (Life, Income Protection, TPD, Business Expense etc.)
A good financial adviser will research the best option for you, deal directly with an insurance company on your behalf and make sure you don’t choose policies that have complex hurdles at claim time.
If you do wish to go it alone, you can look at comparison sites like Canstar; however, they will not give you personal advice on what the best strategy is for you.
General insurance (Car, Home, Contents, Public Indemnity)
General insurance brokers provide a comparison product service. Try to find one that doesn’t just sell their own products.
Private health insurance
The Government have a great independent, comparison website that helps you compare Private Health Policies. You can click here for the link.
The information (including taxation) is general in nature and may not be relevant to your individual circumstances. You should refrain from doing anything in reliance on this information without first obtaining suitable professional advice.
You should obtain and consider the relevant Product Disclosure Statement (PDS) before making any decision to acquire a product.