This is according to moneysupermarket.com who analysed the cost of home insurance premiums using a range of voluntary excess levels, from £0 to £500, to test the myth that a higher excess means a lower premium.
Overall, the research found homeowners can expect to see a £100 difference in the annual cost of a premium when comparing the average cost of a £0 excess (£252) to a £500 excess (£152), but saving £100 in the short term could mean having to cough up £500 later in the event of making a claim.
The research also found premiums reduce only marginally when comparing £100 excess to £300 - a £4 difference - and reveals opting for a £400 excess will actually hike the premium back up to £209 a year - a 25% increase.
Julie Owens, head of home insurance at moneysupermarket.com, said: "Homeowners are reeling from an expensive Christmas, and coupled with the effects of the VAT hike and the latest inflation figures too, will no doubt be looking to cut household costs. However, saving cash by upping the excess on your home cover might not be a wise move as the research clearly shows increasing your excess may be a false economy.
"It is crucial to only set your total home insurance excess at a level you feel comfortable paying in the event of making a claim. Don't forget that the amount of voluntary excess on a policy is the money you are willing to pay should you need to make a claim, in addition to any compulsory excesses the insurer will add and require you to pay. So, if for example you had a £100 excess and a £500 claim you would pay the first £100 and the insurer the remaining £400. If you set your excess at £400 however, you would have to pay a lot more upfront."
