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Insurance Premium Tax increase – are you ready?

This Sunday, 1 November, the rate of tax paid each time an insurance policy is purchased in the UK – known as the Insurance Premium Tax (IPT) - is going to go up.

It will rise from 6% to 9.5% and will affect millions of insurance policies. But what does the rise translate to and is there anything you should do?

The change will affect insurance policies with a start date after 31 October 2015 and is the largest year on year change in IPT since the rates began on 1 October 1994.

It will impact 7.3 million car policies, 4.7 million household policies, 3 million pet policies and 3 million private medical insurance policies, according to the Association of British Insurers (ABI).

This is likely to add nearly £13 to the average comprehensive motor insurance policy; more than £10 to the average combined buildings and contents cover; more than £10 to the average pet insurance policy and more than £40 to the average private medical insurance policy.

The ABI estimate that a family with two cars, a pet and medical insurance is likely to have to pay almost £100 a year more once the increase comes into effect.

However, not all insurance policies are affected.

Which insurance policies are exempt from IPT?

The Government is exempting life insurance and mortgage insurance from IPT

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Higher rate IPT remains unchanged at 20% and applies to travel insurance and warranties for some mechanical and electrical goods.

Insurance renewal – get the best deal

Unfortunately there’s nothing you can do about the rise itself, but there are ways to make your premiums as low as possible.

One of the most effective things you can do is shop around. Remember though, it’s not worth having a cheaper policy if it won’t actually cover you for the things you need it to. Comparison sites are a good place to start.

Get quotes from more than one comparison website and look at them alongside quotes from insurers who don’t appear on comparison sites.

If you find insurance cheaper elsewhere, don’t be afraid to go back to your current insurer with your cheaper quote and try to use it to drive down the price of your renewal.

Always check the features that are important to you in any policy summary. You don’t want the first time you realise something isn’t right to be when you come to make a claim.

There are also specific things you can do, depending on your type of insurance. For example, if you are buying car insurance, you could save hundreds by paying annually, rather than monthly.  You can also reduce your home insurance by installing smoke and burglar alarms.



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