The end of cheap car and home insurance?
This is a warning for anyone who pays for car or home insurance. There’s a rules revolution coming that is likely to mean the end of cheap switchers’ deals.
From January 1, 2022, the financial services regulator’s new insurance rules mean insurers will have to prove, on aggregate, that they charge new and existing customers the same.
The aim is to end the loyalty penalty, but firms are unlikely to just cut renewals to match newbies’ prices
My best guess is that firms will drop existing customers prices somewhat, but also increase new-customer rates – so they meet in the middle.
While the new regime officially starts in January, as it’s a big job, insurers will likely start to shift pricing algorithms sooner – so the clock is ticking.
You can switch even if not at renewal
The sweet spot to check if you can get cheaper prices elsewhere is 23 days before your renewal for car insurance (21 days for home insurance).
Leave it later and car insurance prices can rise 50% (20% for home insurance) because insurers rate those who leave it to the last minute a higher risk.
If your renewal is further away it’s worth checking now anyway if you can cut costs. If you find a substantially cheaper policy, just cancel your existing one. Provided you’ve not claimed or reported an incident this insurance year, you should get a pro-rata refund minus a one-off admin fee (check first).
Bear in mind you might not earn this year’s no-claims bonus.
Find the right policy for less
Always use more than one comparison site. Sites such as confused.com, comparethemarket.com and moneysupermarket.com may have different prices for the same insurer. Remember to check directline.com which isn’t on comparison sites. If you’ve more than one car in the household, multi-car insurance can win. Providers include admiral.com, aviva.co.uk and lv.com. If you already have multi-car look at individual policies via comparison sites – the opposite to what you’ve got can work out cheapest due to new customer incentives.
You can see full guides at moneysavingexpert.com/insurance.
Home insurance: level of cover is key
For buildings, don’t over-insure: you only need to cover the cost of rebuilding your home, not the purchase cost. There’s a calculator at abi.bcis.co.uk.
For contents, don’t under-insure: if you only insure half the value of your stuff, you may only get half the pay-out.
Don’t pay monthly. It’s usually just an expensive loan. If you can’t afford to pay in one go, you may be better off paying with a 0% credit card (see mse. me/interestfree). Just don’t borrow more and clear within the year.
Cashback sites such as topcashback. co.uk and quidco.com give up to £40 if you buy a policy through their comparisons. If you find a cheap price elsewhere, check if you can get the same price buying through a cashback site, and you could get up to £70 on top.
■ Martin Lewis is the founder and chair of MoneySavingExpert.com. To get his free Money Tips weekly email, go to moneysavingexpert.com/latesttip