How to save money and find a good deal

The phrase ‘you get what you pay for’ suggests that you can’t find a good deal at a low price - however, with home insurance it is possible to have the best of both worlds.

Thanks to the emergence of comparison websites pushing insurers to be competitive, finding an affordable deal is relatively straightforward. We recommend using Gocompare.com who compare over 75 home insurance companies. However, you must also pay attention to the cover levels available to ensure you're getting value for money.

What should you look for from a home insurance policy?

There are two forms of home insurance - these are:

• Buildings insurance: This covers the structure of your home as well as its permanent fixtures and fittings - some policies also incorporate outbuildings and underground pipes, as well as cables and glass in doors and windows. Check to see what risks you are protected against - typically buildings insurance covers damage caused by subsidence, floods, malicious damage, storms, theft and fires.
• Contents insurance: This protects items in your home that are not permanent fixtures and fittings (subject to exclusions) - typically this includes carpets, curtains, clothing, electrical items and furniture. Check to see what risks these items are protected against - such as floods, theft, explosions, fires and water leaks. Also look to see whether the insurer offers: new for old cover - meaning that if possessions are ruined they are replaced with new items; or wear and tear cover, where a percentage of what you paid is deducted for depreciation.

Crucially, when shopping around you should pay attention to the terms and conditions of the policies you are considering and look for exclusions (circumstances in which you will not be covered). Also look for the excess level - this is the amount you will pay towards a claim and is typically split into a compulsory excess set by the insurer and a voluntary excess, an additional amount you agree to pay from the outset in case a claim is necessary.

How can you find a good deal on home insurance?

In the past, shopping around for home insurance was a long-winded process but thanks to the internet it needn’t be time consuming to find a good deal.

Most insurers offer their cheapest deals online due to the savings they make on overheads. However, just because an insurer offers a substantial online discount it doesn’t mean you should automatically accept their offer - as there may be bigger savings elsewhere.

So to get an accurate impression of the market use a comparison website - the leading websites compare deals from around 65 home insurance companies. This gives you an overview of the offers available, their prices and their cover levels. Just remember that the cheapest deal is always listed first but before accepting the cheapest deal check to see whether or not it offers the level of cover you require.

Even if you get a cheap deal once, don’t fall into the trap of assuming it will remain cheap year after year. Most insurers offer their cheapest deals to new customers, so it is sensible to review the deals available during every renewal period.

How can you reduce your home insurance premiums?

According to the AA British Insurance Premium Index, buildings insurance averaged £227 a year at the end of October 2009; while contents insurance averaged £125 a year. However, significant amounts of money can be saved by comparing deals from three or more insurers - the average shop-around premiums, according to the Index, were £130 for buildings insurance (a saving of nearly £100 a year); and £67 for contents insurance (a saving of nearly £60 a year).

In addition to shopping around for quotes you should remember that insurers base their premiums on risk - i.e. the more likely you are to make a claim, the more you will pay in premiums. This takes into account factors such as your claims history; your address, such as if you live in a high crime or flood-risk area; and your personal circumstances - such as whether you are married and what you do for a living. Reducing your risk to an insurer will therefore reduce your premiums - here are some tips to help you save money:

• Fire prevention: Fitting smoke alarms and fire extinguishers in your home to stop a fire getting out of control could earn a discount from your insurer. Many providers also ask whether or not you smoke, as smokers are deemed a higher risk group - so saving money on premiums could be a good incentive to quit.
• Change your locks: Consult your insurer about which locks to fit at your home as they could reduce your premiums - generally, five-lever mortise locks are recommended on doors, with key-operated window locks also advised.
• Combined policies: Some insurers offer discounts if you take out both buildings and contents insurance as a combined deal with the same company.
• Fit security devices: There may be discounts available if you fit electronic security devices in your home such as burglar alarms, security lighting, CCTV cameras and time-switch lights - your insurer should be able to recommend systems that offer the largest savings.
• Increase your excess: Setting the excess at a high level should reduce your premiums as this means you will pay more in the event of a claim. However, only set the excess at a level you can comfortably afford.
• Neighbours: Consider teaming up with your neighbours to form a Neighbourhood Watch group as this could reduce your premiums.
• Pay annually: You can avoid monthly interest charges if you agree to pay your home insurance annually.