Insurance companies are like any other type of company. They provide a service and want to make a reasonable profit. The service they provide is a financial settlement in case some specified event happens. The profit they make it whatever is left over the premiums they collect from their customers. Insurance companies take a financial risk in providing their service. Once you understand how insurance works, you will understand how you can save money on any insurance premium and get a
cheap insurance deal.
Reduce your risk
Insurance companies base your premiums on two things, the likelihood that you will make a claim against your policy, and the amount that they will have to pay. If you can reduce your risk, and can convince you insurer of this fact, then they will probably reduce your premium. For many insured items, this could mean installing an alarm system, or other theft deterrent. It could mean that you should choose a safe neighborhood to live in, for car and home insurance. It could mean improving your health for life insurance. There are many ways to reduce your risk. Take advantage of them.
Increase your excess
The excess is the first amount payable. In each case you make a claim on your policy, it is the amount you cover, and is deducted from whatever the insurance company must pay first. The excess is usually specified on your policy, and will be different for different sections of each policy. For example, in comprehensive auto insurance, you may have a different excess for theft versus accident. If you increase your excess, it will mean that your insurance company is facing a lower potential payout, regardless of the amount of your claim. Your premiums will go down correspondingly.
Reduce your coverage
Sometimes it is possible to reduce your coverage, or ever skip certain types of coverage altogether. The best coverage for
car insurance is comprehensive, which covers your car and any car that it is involved in an accident with, plus theft and fire. It is possible to reduce this coverage to third party only, for much less money. However, you may leave yourself financially vulnerable. It may instead be possible to reduce the maximum amount that a policy will pay out for different events. This is slightly better in terms of your financial risk. Partial coverage is generally better than no coverage.
Don't make trivial claims
It is not a good idea to claim on every single trivial thing your insurance covers. Your insurance is meant to cover emergencies. If you claim every time your car gets a little scratch, or a plastic lawn chair is stolen from your backyard, your insurance company will recognize you as a high risk customer. They can't increase your premiums until your policy expires, or until a specified amount of time has elapsed. But when that happens, watch out! Your premiums will increase to cover their new assessment of your risk. Instead, try to save money by taking advantage of the no-claims bonus most insurance companies offer. After some period of years, usually between two and five, if you haven't made a claim on your policy, your insurance company will refund part of your premium to you. It's in both your interests for you not to make a claim unless you really need to. You won't have to pay an increased premium later, and they won't have to deal with and cover trivial claims.
