Insurance

Insurance is a necessary evil that can chew up big chunks of the household budget unless it’s kept in check and subject to regular reviews. The good news is that a bit of planning can slash the annual cost of cover by thousands of dollars.

Our calculations show that a single person could cut the cost of an annual insurance bill by 44 per cent to $3628.

And a typical family could slash premiums by almost 43 per cent, from $10,407 to $5917 with a few easy steps.

The first step is to take a macro approach to insurance by looking at all cover, rather than each and every policy in isolation.

This really does pay off.

Then make the most of the good deals available due to competition from international entrants to the local market.

These firms are forcing the big local insurers to temper increases in premiums and to launch online services such as The Buzz, owned by NRMA, and Bingle (a Suncorp initiative).

So assess your overall cover, how much you really need and the risks you’re prepared to take in return for a lower insurance bill.

It is easy to lose track of all the premiums that most of us pay, so don’t underestimate the potential for cost savings.

If you pay an annual premium for private health cover in August, for example, then another annual premium for car insurance in May and at other times during the year cough up for other cover, you may not realise the total cost.

So grab a pencil – or even open a spreadsheet – and search out all your insurance policies to tally all the premiums you pay each year.

This includes building cover, home and contents, health cover, life insurance, income protection and other personal insurance.

It will also include occasional policies such as comprehensive travel insurance.

Then set about crafting a better strategy.

We drew up two scenarios to show how it’s done – one for a single person and the other for a family with two children.

Sure, it is cheaper to pay annual premiums than by the month. But it’s obviously not always possible, so we’ve considered other ways to achieve the desired result.

Households fielding school fees and a big mortgage can scrabble for the necessary cash flow to pay large annual premiums.

But while we are all different, there are common strategies to cut costs without compromising on insurance cover.

You may live in a different state to the customers in our scenarios, have fewer children or own a less expensive home, but the principles to employ are the same.

We approached NRMA Insurance to review the home and car insurance needs of the clients in our scenarios. Then we took their health cover requirements to health insurance broker Health Link Consultants.

Financial advisory firm ipac helped out with products such as life cover, income protection, total and permanent disablement (TPD) and trauma protection.

To round off the list of cover in our calculations, online insurer travelinsurancedirect.com.au helped find better deals on the cover for an overseas holiday.

The same principles used to cut the cost of all these policies can be used for others, such as insurance for a boat.

There are a few points to note when doing your calculations.

First, premiums differ between states and according to individual circumstances. Second, many savings come from bundling your policies with the same insurer.

Then there are loyalty discounts for keeping your custom with the same insurer for, say, five years.

Before you commit to such benefits, use websites such as www.canstar.com.au to work out whether you are actually better off going for single policies with different insurers.