The government's planned rise in insurance premium tax was one of the less popular items in the Chancellor's Budget announced on 8th July…
The government's planned rise in insurance premium tax was one of the less popular items in the Chancellor's Budget announced on 8th July.
Under the new regulations, which are set to come into force in November, the levy will be raised from 6pc to 9.5pc.
The rate rise will affect everything from contents to car insurance and the British Insurance Brokers Association has hit back, describing the move as a "stealth tax".
Consumer Intelligence estimates it will add £20 to the average motor insurance policy and £50 for those aged under 25.
While little can be done to stop the increase, there are plenty of measures consumers can take as individuals, which can save them money, but one false economy is to stop insuring your home, car and contents.
The recently released Consumer Intelligence Switching Index reveals that 27 per cent of policy holders are planning to either cut or cancel their cover because of the rate hikes.
While it may seem like an obvious way to reduce outgoings, if a car, home, or its contents are damaged, then the cost of repairing or replacing items could land uninsured consumers in serious amounts of debt.
The index also showed that 56 per cent of customers are considering switching provider in response to the tax rise.
Generic tips for insurance savings
Don't let renewals happen automatically, always make sure you read any letters from providers and give yourself enough time to do some research online.
Go to a price comparison site, but make sure you enter all details correctly or claims may be invalid. Choose the cheapest option in terms of the most comprehensive and cost-effective deal.
While it may feel like a considerable hit on your bank account, it makes sense to pay for insurance annually. uSwitch.com estimates you could save yourself 20 per cent on the cost of insurance, but be sure to put it on an interest-free credit card, or better still, factor it into your annual budget.
Some bank accounts and credit cards offer free insurance, so it is worth checking to see if this is already in place, and if not, work out whether it pays to get cover included this way.
Cost-cutting tips for car insurance
When it comes to car insurance, there are plenty of things you can do to cut the cost. One option is to consider investing in a Black Box. Your insurer will install a small device in your vehicle that tracks when and how you drive. Premiums are then reduced for good driving at hours that are considered lower risk.
This is also a good idea if you have youngsters on a policy, as it encourages them to take more care on the roads.
Young drivers under the age of 25 or those who have recently passed their test are considered to be at greater risk of having an accident. If this is you, you should consider adding a more experienced driver to your policy if they also use the car, as this can cut the cost of a quote considerably.
As with all other types of insurance, it always pays to shop around. Taking just 20 minutes on a price comparison site could save you a considerable amount of money. If you're happy with your provider and are reluctant to change, you could go back to them with the best quote and see if they will match it.
Remember, insurance companies are in the business of making money and if they can sell you a higher premium, they will. It is therefore up to you to take the initiative, do the research and save yourself some serious cash.