Insurance premium tax hike – what it means for your policy
Published 5 September 2015 by Emily Bancroft
The cost of your insurance premiums is going up – find out why.
You might have missed it in amongst all of the big headlines like the living wage announcement or the benefits cap, but the recent Summer Budget also unveiled an increase in what we’ll all pay for insurance come the end of 2015.
Insurance premium tax basic rate is set to increase from 6% to 9.5% and it means that prices for insurance policies are likely to rise towards the end of the year. Let’s take a look at how you could be affected by this new tax increase.
Paying for the premium
The increase in insurance premium tax is set to come into force from November, and it means that families will pay more for their home and car insurance policies. According to Money Supermarket research, families with two cars could have to pay an extra £35 a year on average for their total insurance premiums. For those already living on a stretched budget, this extra cost could make finances even harder to manage.
Some insurers are already predicting that the rise in insurance premium tax could encourage people just to skip paying for insurance, meaning they could be driving around without any cover. This could mean that if you have a crash with one of these uninsured drivers, you might not be able to claim, depending on the details of your policy.
How you could save
By the time your insurance policies come round for renewal, it’s likely that they’ll have gone up quite a bit. If you’re looking to cut what you’re spending on insurance, we’ve put together a few helpful tips on how you can save on your policies:
•Shop around: we really can’t say it enough – look at a range of insurers when you’re finding a policy. Some people still just let their car insurance auto-renew but you could be getting a better deal with another insurer. Use a comparison site like uSwitch but remember to manually check with insurers that aren’t on these websites, like Aviva, Direct Line and Zurich.
• Higher excess: opting to pay a voluntarily higher excess when you need to claim can mean that you pay a lower monthly premium. However, be careful not to take this to the extreme. If your excess is £1,000 and your car’s only worth £1,000, you won’t get anything if you write your car off, so it’s not worth the savings you’ll make every month.
• Fully comp: don’t always assume that third party insurance will be the cheapest option. In fact, some insurers could charge you more for this, as they assume you’re more likely to be a careless driver and you’re therefore more of a risk to insure.
• Change your job: not literally! Sometimes you could save money on your insurance policies just by how you word your job title. For example, Sales Assistant might be cheaper than Shop Assistant or Shop Manager. Money Saving Expert has a useful tool to help you find the cheapest jobs, but make sure you’re not saying you do something that you don’t, as this is fraud and could invalidate your insurance policy.