How can I lower the price of my insurance?

How insurance pricing works, and what affects what you pay

The price of an insurance policy is primarily determined by the insurer's assessment of two things: the value of what's being insured, and the level of risk that a claim will be made.

You may be able to reduce the price you pay by demonstrating to insurers that you are lower risk. Common examples include:

• Building a no-claims history. On motor insurance, each claim-free year typically earns a no-claims discount, which can reduce premiums by 30% or more after five years with most insurers. On home insurance, a multi-year claim-free record is also considered, though it is not formalised in the same way.
• Improving your risk profile. On home insurance, fitting approved window locks (BS 3621 mortice locks on final exit doors, for example) or a professionally monitored burglar alarm can reduce premiums. On motor insurance, parking off-road overnight, fitting a Thatcham-approved tracker, or completing a Pass Plus course can have a similar effect.

You can also lower the price of insurance by adjusting the cover itself. Because the insurer anticipates paying out less, the premium falls. However, each of these choices means you bear more of the cost if you do claim:

• Increasing the voluntary excess. Raising your excess from, say, £100 to £250 typically reduces the premium, but you pay the higher amount on every claim. Note that this is on top of any compulsory excess the insurer sets.
• Being selective about optional cover. On home contents insurance, accidental damage cover is often optional and adds around 10 to 20% to the premium. On travel insurance, gadget cover, cruise cover, and winter sports cover are usually optional add-ons. Removing cover you don't need saves money, but only if you genuinely don't need it.
• Choosing a lower tier of product. Travel insurance policies often offer tiered baggage limits (e.g. £2,000 vs £3,000 per trip) and tiered medical or cancellation limits. A lower tier costs less but caps what the insurer will pay if you claim.

Be aware that reducing cover, increasing excesses, or omitting optional cover can leave you underinsured. If a claim exceeds your cover, you pay the difference. It's worth checking that the cover you choose still meets your needs.

Payment frequency

Most insurers offer a lower total cost for annual payment than for monthly payment. Monthly payment is typically a regulated credit agreement: the insurer or a third-party credit provider lends you the annual premium and you repay it monthly with interest. The APR must be disclosed to you and is often in the 20 to 30% range, though it varies. The total cost is usually somewhere between 5% and 15% more than paying annually.

Shopping around at renewal

Insurers will typically issue a renewal quote that may be higher than your previous year's premium. Since January 2022, FCA rules require insurers to offer renewing customers a price no higher than the equivalent new-business price for the same policy. This is known as the "loyalty penalty" ban for home and motor insurance. However, the new-business price itself can still rise year on year, so it remains worth comparing quotes from other insurers at each renewal.

A note on getting help

This is general information about how insurance pricing works, not a personal recommendation. If your situation is complex (for example, you have pre-existing medical conditions, high-value items, a non-standard property, or you're not sure what cover you need), speaking with an FCA-authorised insurance broker can help. The British Insurance Brokers' Association offers a free find-a-broker service on 0370 950 1790 or at biba.org.uk.