Tuesday, 6 August 2013

Renewing your home insurance in 2013...don't forget the fire service levy

This post is for Victorians (in Australia) renewing their home insurance in 2013.  If you have already received your home insurance renewal you will have noticed something strange. Instead of the usual hikes in insurance which you then have to negotiate down your insurance may have been rather flat, or even dropped this year.

Before you go out and celebrate don't forget to adjust for the change in the fire service levy!

What is the change?

From 1 July 2013, the fire service levy (which you were already being charged) has changed from being part of your insurance cost to being part of your rates bill.

For once this is a political change that actually makes sense - it was recommended by the Victorian Bushfires Royal Commission and is fairer for a number of reasons including:

  1. All property owners now have to contribute.  Previously if you didn't have insurance you didn't have to pay anything at all
  2. People who insured their property for less used to pay less than people that fully insured their properties and so could game the system
  3. It was previously at the insurers discretion how they recovered their costs so it was not always an equitable system
  4. GST and stamp duty were charged 
That is some background to the why the system was changed but suffice to say that the change make sense and when I compare how much I used to pay and how much I pay now, the change was minimal so there is not that big a difference for me.

Why is it important to keep in mind when renewing your insurance?

If you do not take this into account you could get slugged with a large insurance premium increase and not even know it.  Typically we have some sort of idea what our insurance premium was last year and so if it does not change at all we are pretty happy about this.

However this is not the case this year.  Your insurance should be falling because you are no longer paying the bushfire levy through them.  

On your premium statement last year your insurer should have broken it out and so you can see what the cost of your insurance before the fire levy was.  If they didn't though, it is pretty easy to get a proxy for it
  • Take your rates form for this year which will break out the levy
  • Subtract this amount from your insurance policy from last year
  • The remaining number is what you should be comparing your renewal rate to
Don't forget to negotiate your insurance

I was pretty lucky this year - even accounting for the above my insurance rates did not move much at all.  I'm still going to try and be cheeky and get my rate reduced however even if I can't I'm still happy to stay with the same insurer.

If you have had an increase though it is probably worth shopping around for a better deal and then using this to leverage a price reduction from your insurer.  Trust me when I say they will reduce your insurance - I get a reduction every year!  You do need to have your evidence though with all the different prices.

Churn cost insurers quite a lot and so they are often willing to give a discount to avoid you moving.  If they won't give you a discount and you are happy with the new insurer then go ahead and switch your insurance - you get nothing by 'being loyal'

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