When it comes to short-term insurance premiums for your home and cars, several factors can influence the cost. Understanding these can help you manage and potentially reduce your insurance expenses. Here’s a detailed look at the key elements affecting your premiums.
Home Insurance Factors
- Location, Location, Location: The location of your home plays a significant role in determining your insurance premium. Homes in areas prone to natural disasters such as floods, earthquakes, or hurricanes often have higher premiums. Similarly, properties in high-crime areas tend to cost more to insure due to the increased risk of theft or vandalism. In addition, you stand the risk of insurers applying higher excesses or excluding cover as a whole.
- Property Characteristics: The age, construction materials, and overall condition of your home also affect your premium. Older homes might have outdated electrical, plumbing, and heating systems that pose higher risks. Homes constructed with fire-resistant materials or those with modern, robust building standards might benefit from lower premiums. Always bear in mind that in the event of a claim, for example, an electrical fire, insurers will request an Electrical Certificate Of Compliance (ECOC / COC). It is imperative that all safety standards and regulations are in place. Many insurers have also started charging higher rates when you make use of alternate energy sources – e.g. – solar systems (lithium batteries) and generators (fuel) are considered high risk.
- Security Features: Installing security systems, smoke detectors and fire alarms may reduce your home insurance premium, as certain insurers discount your premium as a reward for the additional precautionary measures . These features lower the risk of damage or loss, making your property less risky to insure.
- Claims History: Your personal claims history can influence your premium. If you have a record of frequent claims, insurers may view you as a higher risk, leading to increased premiums. Maintaining a claim-free history can help keep your costs down.
Car Insurance Factors
- Driving History: One of the most significant factors in determining your car insurance premium is your driving history. A clean record with no accidents typically results in lower premiums. On the other hand speeding may result in your premium been increased due to insurers monitoring your driver behaviours via telematic , driving under the influence (DUI), or at-fault accidents can raise your rates. If you have a DUI, insurers will rarely take you on as a client.
- Vehicle Type: The make, model, and year of your car play a crucial role. High-performance or luxury cars generally attract higher premiums due to the cost of repairs and parts. Certain vehicles are considered high risk and are charged at a greater rate due to the risk of theft/hijacking. Vehicles with advanced safety features and good crash test ratings can benefit from lower insurance costs.
- Usage and Mileage: How often and how far you drive your car affects your premium. Higher annual mileage increases the likelihood of accidents, leading to higher premiums. Conversely, if you use your car infrequently, you may qualify for lower rates.
Final Thoughts
Understanding the factors that influence your home and car insurance premiums allows you to make informed decisions and potentially lower your costs. By maintaining a clean driving record, investing in safety features, and carefully selecting your coverage levels, you can manage your insurance expenses more effectively.
It is advisable to review your sum insured in respect of buildings and contents as insurers usually apply an inflationary increase of between 8% to 10% on renewal, please always be mindful of “average” when reviewing the sums that are insured.
Authored by Colin Long CFP®
Director / Advisory Partner
18 July 2024