Lower insurance premiums with higher excess

Paul Mamakoko from #DearDarkie found a way around high insurance premiums. Please note, this strategy is only suitable if you already have a sizeable emergency fund.

I did my annual short-term insurance (household contents and car) review. I wasn’t happy with the final monthly premium, even after a few discounts and haggling. Then the agent suggested a higher excess for lower monthly premiums. I asked for the maximum, R20 000, which I can easily access from my emergency fund.

I’ve increased my monthly savings into the said emergency fund as well by the amount I’m “saving” with the reduced premium.

Any claim less than R20 000 I will fix myself. Anything over, I’ll have to pay the first R17 000 of the total cost of the claim.

Extra tip 1: I don’t pay for car hire. I save the portion that would’ve gone to the car hire. Should I need car hire, I’ll just use a combination of Uber or hire the car myself. I’ll pay for it with my savings over the years from the emergency fund. My wife has a car, too, which we could share in case of accident.

Extra tip 2: I don’t pay for a tracking device if the monthly premium of the tracking is more than the savings I get from my insurance for having a tracking device. I’ve been doing this for years and have never had a situation where having a tracking device made it slightly cheaper.

“Self-insuring” means you can afford to replace items that were lost and damaged without insurance. The more assets you have on hand to get you through a difficult time, the lower your insurance premiums can become.

We like that, because insurance premiums are a liability on your balance sheet. Reducing your insurance premiums and buying assets with your savings gets you even further ahead.

As you can see from Paul’s strategy, you can do this systematically every year. It’s another way to build your wealth incrementally.

This article was first published on Just One Lap.