Counting the cost of cutting back on insurance...

As the recession continues to bite, we are all constantly looking for ways in which we can save a few pounds here and there, and consequently reviewing all of our outgoings.

One area that many of us will be putting under the spotlight is the amount we spend on insurance and how this area of expense could be cut back; but before you go cancelling or cutting back on your insurances read on...

Home Insurance

For anyone who has a mortgage, buildings insurance is usually compulsory as a condition set out by your lender, however contents cover remains optional. If the worst were to happen and you didn't have a contents policy in place take a moment to think of the cost of replacing your belongings. In addition, consider the total value of all your belongings against the amount they are insured for, if you have been under insuring yourself consider the implications of this and the inconvenience of having to meet any shortfall. Or, you could find that you have actually miscalculated and over insured yourself and that you're paying for more cover than you actually need, in this case as soon as your renewal comes through shop around using the new sum and you should make an instantaneous saving without having to do anything!!

Another area of home insurance that many may sacrifice by either removing it from the policy, or purposely taking out cover which excludes flood insurance. We all think "it won't happen to me" however reports of extreme weather which include flooding are unfortunately more and more common. The trauma of losing your belongings and having to move out of your home is heart breaking, but without any form of insurance in place this would be far worse.

Car Insurance

In order to drive legally on UK roads, the minimum level of cover that we must have is third party. Whereas most insurance companies will not allow you to insure a car worth more than £4,000 or £5,000 at anything less than fully comprehensive, anyone who falls just below this threshold is able to buy third party only cover. It's a common mistake to think that this level of cover will be considerably cheaper, as in reality a majority of the price that your car insurance is determined by is the other factors, such as your age, address, occupation and driving history to name but a few; your car is only a small element of the insurance premium and as such there is little difference between fully comprehensive and third party cover.

Another costly mistake we can make when applying for car insurance is not to accurately calculate our annual mileage. Over insuring by just 5,000 miles a year could cost you around an extra 10% of your premium alone, so once again, if you find you are actually driving less miles than you originally thought, you can make an instantaneous saving when searching for a new policy.

Travel Insurance

Everyone enjoys a holiday, be it a city break, adventure sports holiday or two weeks on a beach in the sun. However around 25% of us still tend to travel without insurance taking the risk that we'll be fine. Although most trips do go according to plan, the unfortunate can always happen when we're least expecting it and this can prove costly, for example the cost of an air ambulance from Europe back to the UK can range from £20,000 to over £100,000. Additionally, in countries such as the USA where there is no state medical cover, the cost of an x-ray alone can be several hundred pounds and that's before any other treatment!

For the just over £10 - less than the price of a couple of cocktails in the sun; a healthy adult couple can get one week's comprehensive cover to Europe which will cover any unforeseen events.

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Moneyextra.com recommends you take independent financial advice before acting on any article

2009-03-06 12:26:19 © Moneyextra.com