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Wherever you look these days you'll see insurance companies using headline grabbing multi coloured slogans in a concerted effort to win your business. So whether you're watching TV, surfing online or driving past a billboard poster, you will have undoubtedly witnessed one of the following tempting invitations.
- 'A free MOT when you buy our car insurance (Tesco Personal Finance)
- 'We promise to beat your renewal quote' (Privilege)
- 'Sale now on: Buy a policy today and get a Sat Nav for just £49.99!' (Kwik Fit insurance)
- 'Fix your home insurance premiums for three years'(Towergate)
These kinds of messages are commonplace, but is it time to dig a bit deeper in order to see past the marketing hype?
A promise to beat your insurance renewal quote is little more than a sales gimmick, especially in the home and car insurance arenas. The likes of Privilege, Churchill and First Direct are just some of the bigger players in the market currently in the queue to beat your motor renewal quotation.
The thing to remember here is that it's not the renewal quote that they should be looking to beat; they should be offering you a competitive product for years to come if they're serious about securing your loyalty. Insurers generally pull out all the stops to win you over as a new customer and the first year you're with them they'll often offer you cover at a really low price. However from then onwards they rely on customer apathy and will usually hike your premium the following year, even if you haven't made a claim. Basically they're hoping you can't be bothered to search for a better deal when the renewal notice hits your doormat. If you can't summon up the energy to switch insurers they'll make a killing on your new premium and recoup most of the losses they made on you in year one.
There is a golden rule here, which if you religiously follow year in, year out, will save you a packet: Never just pay up when you get your renewal notice.
The arrival of the renewal notice should actually be the trigger for you to start shopping around, and not surprisingly you'll often find that rival insurers will be trying to tempt you with promises of cheaper cover. Unfortunately it's not these competitor quotes that the 'loud and proud' insurers are offering to beat; it's just the inflated renewal quote from your existing insurer.
Here's another trick that insurers use, Halifax for example is promising a 35% discount on buildings and contents cover bought together online. It sounds great but when you do a bit of homework you'll find pretty much all insurers offer similar discounts for buildings and contents cover when bought as a package, and also for policies purchased via the internet.
Similar examples of combined pricing can be found with Sainsbury's Bank offering a 20% discount on combined buildings and contents policies, and Nationwide Building Society giving new customers a 20% discount if they buy buildings and contents cover together and a further 10% saving when buying online.
Other insurers offer straightforward cash off the price you pay. For example, the Post Office is giving £50 cashback on car insurance. But surely if 15% or 30% or £50 can be discounted almost at will, then the policy was just simply far too expensive in the first place?
A couple of providers offer to fix your premiums for a set time period. For example, Towergate is currently offering to fix home insurance premiums for three years while only last year HSBC was giving its mortgage customers the chance to fix their home insurance premiums for five years. Although this may sound tempting, when you explore a little further, you'll see that such promises come with a hefty price tag attached.
HSBC is not renowned as being the most competitive when it comes to home insurance. In fact covering the contents of my house with HSBC would set me back £227 for the year, over £100 more than a couple of other providers who were offering identical cover. If I'd taken up the HSBC deal to freeze my premium for the next five years, I would have been over £500 worse off as a result.
Another point to consider is that if you don't make any claims on your home insurance, you generally benefit from a no claims discount in future years. But if you agree to fix the price of your premiums for a period of time, you'll be unable to claim such discounts on your policy.
So what should you do when you're looking for a new insurance policy?
My advice is simple: don't get taken in by the cheap marketing tricks. Use the Moneynet car or buildings insurance comparisons to seek out the most competitively priced insurance that suits your circumstances.
When your policy is up for renewal, don't expect your insurance company to reward your loyalty with a discounted premium because it's highly likely that they won't.
These days, switching insurance is a relatively speedy and pain free process, so if your insurer isn't up to the mark, take your custom elsewhere and give your bank balance a welcome boost in the process.
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