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Do You Have the Home Insurance You Need?

The cost-of-living crisis is having an enormous impact on household bills, including energy and insurance. This is prompting many to look for ways to save money. In this post we look at home insurance and what you can do to reduce costs.

Many reports, such as those from the Association of British Insurers (ABI), are telling us that the average cost of home insurance has actually fallen over the past 12 months. The costs of both buildings and contents insurance are reported to have dropped to the lowest levels since the organisation began collecting data in 2012.

One of the primary reasons cited for this apparent and welcome decline in the cost of insurance are new rules, introduced by the Financial Conduct Authority, designed to remove the cost penalty experienced by loyal customers. This change has been described as the biggest shake-up seen by the UK insurance industry in decades. It means that loyal customers, who don’t switch insurers, will now pay the same as new customers. Previously, insurance companies would entice new customers by offering them a far better deal than existing customers, a practice known as ‘price walking’. After many years of complaints this practice has now been outlawed and the change is expected to be beneficial to customers who remain loyal to their insurance providers.

Another reason for the fall in insurance costs is the impact of the COVID pandemic. Many more people are now working from home and not driving to and from their workplaces. This has resulted in fewer burglaries and car accidents, reducing the numbers of insurance claims.

But recent weather extremes have resulted in a surge in insurance claims due to subsidence, burst pipes and icy roads, so increased costs due to insurance claims will inevitably be passed on to consumers. It will be interesting to see how prices change over 2023.

What is Home Insurance?

Home insurance is also often called house insurance. It`s intended to provide people with financial protection if something happens to their belongings or their home.

Unlike motor insurance, which is a legal requirement for those driving on UK roads, people are not required to have home insurance. But home insurance provides peace of mind as it ensures financial costs are covered if an unwelcome occurrence takes place.

There are two main types of home insurance which are sometimes lumped together from a single insurer: buildings insurance and contents insurance.

Buildings insurance provides cover for structural damage. This insurance should cover the full cost of rebuilding the property and will also include the cost of replacing damaged items such as pipes and cables along with garages and sheds. It`s always worth talking to an insurance provider to clarify exactly what their buildings insurance covers - and what it doesn`t. While it`s not compulsory buildings insurance is normally a requirement of most mortgage providers who need to make certain the property for which they are providing a loan is adequately protected. Even if you don’t have a mortgage, buildings insurance should be a top priority.

Contents insurance provides cover for all personal possessions in the event of theft, fire, flooding or other incidents resulting in loss or damage. Contents insurance covers everything that would be taken when moving house including furniture, kitchen appliances, tools, electronics, jewellery, bikes and more. It`s always important to clarify any specific recommendations from home insurance providers such as taking photographs of valuables , such as jewellery, antiques or artwork and ensuring valuable bikes and motorbikes are securely anchored. Policies can also provide cover for items used away from the home, such as bicycles, or valuables taken on holiday.

Most home contents insurance policies carry an excess. This is the defined amount of an insurance claim that must be paid by the insured person before the insurer pays up. Typically this is around £50 to £100.

Additional insurance costs can be incurred to cover items that are taken away from the home such as cameras or jewellery. And further insurance costs may be needed to cover specific, valuable items such as artwork, jewellery or high value possessions. These requirements should always be discussed with a home insurance provider.

Who Needs Home Insurance?

There is often a great deal of confusion over who is responsible for home insurance, especially when properties are rented out.

Homeowner occupiers are responsible for both the buildings insurance and the contents insurance. As noted, if there is a mortgage on the property then buildings insurance will be a condition of the mortgage provider.

Landlords who are renting properties will be responsible for buildings insurance, as well as maintenance of the properties. They also need home contents insurance to cover any furniture and fittings that come with the property.

Property renters and tenants are only responsible for their own possessions and should therefore have appropriate contents insurance. Buildings insurance is the responsibility of their landlords.

Average Cost of Home Insurance

The price comparison site Comparethemarket has reported how household bills, including energy costs and motor insurance, have escalated by an average or around £1316 over the past year. This calculation is based on the costs of three primary bills; energy, home insurance and motor insurance.

Although reports from the ABI indicate the average costs of both car insurance and home insurance have decreased, Comparethemarket reports that the average cost of car insurance in November 2022 was £629, 14% higher than it was in the previous year.

Similarly, it`s reported that home insurance costs have escalated, due to inflation. They state that the average home insurance premium in November 2021 was £134 and this has grown by 13% year-on-year to £151 in November 2022.

The difference between the figures quoted by the ABI and those reported from various price trackers is apparently due to the different methodologies used to derive these metrics. The ABI uses the actual prices paid by insurance policy holders while price comparison websites use customer insurance quotes to generate their price comparisons.

How to Find the Best Home Insurance Deal

Identifying the best home insurance deal is an effective way to make savings. It`s always a good idea to shop around and price comparison websites make it easy to compare policies from multiple providers.

When considering home insurance needs people will sometimes incorrectly assess the value of their property and it`s contents. This can result in unnecessarily high insurance premiums. It is worth remembering that buildings insurance should cover the cost of rebuilding the property and this isn’t the same as the properties market value.

It`s also a good idea to carefully consider the various ‘add ons’ offered by insurance providers and whether these provide what’s needed. They can include cover for legal expenses, accidental damage, home emergencies and more.

When considering home insurance policies it`s important to remember that it`s not only the price that’s important. The reputation and performance of the insurance provider should always be considered. Luckily, online reviews and feedback from existing and previous customers provide an abundance of valuable insight and are very easy to find.

How to Reduce Your Insurance Costs

A simple way to save on annual home insurance costs is to pay annually rather than monthly. Insurance providers provide the convenient option to spread the cost of insurance cover by making monthly payments but this incurs additional costs as the insurer is effectively providing a loan. Paying the full amount annually avoids these costs.

Another way to potentially reduce home insurance costs is to boost security. Most home insurance policies require a sensible, minimum level of home security. Enhancing home security by installing burglar alarms, CCTV, security lighting and stronger locks can potentially reduce home insurance premiums. The home insurance provider should provide guidance regarding exactly what will minimise home insurance costs.

As noted, home insurance has two primary components: buildings and contents. A combined insurance policy that covers both is often notably cheaper than taking out two separate policies.

It`s also important to take advantage of any no claims discount. Not making a claim on your home insurance will normally accrue a no-claims-discount that should be used when a policy comes up for renewal.

Another option to consider is to ask the insurance provider for a higher excess payment. Increasing the excess tells the insurer there is less likelihood of a claim which can reduce insurance premium payments.

As well as improvements to home security, ensuring a home is well maintained is also important for minimising costs. Lagging exterior pipework to minimise the risk of burst pipes in freezing weather is a good example. If this is done and damage is experienced due to a burst pipe there is greater chance the insurance company will pay up as they will recognise that efforts were made to protect the pipes.

Installing and maintaining smoke alarms is another valuable safety precaution that can reduce home insurance premiums. But if an insurance provider has been told a property has smoke alarms it`s essential they are maintained in good working order. If an insurer discovers smoke alarms weren’t working at the time of a fire they may reject an insurance claim.

Don’t Overlook Your Home Insurance Needs

We are not in the insurance business and don’t provide financial advice. But we deal with a lot of both home and business security needs arising as a result of burglary and theft, along with the need to comply with insurance requirements. So we’ve learned how important both buildings and contents insurance are. We know that it`s worth reviewing your insurance needs, ensuring you have the cover required - and you’re not paying too much for it.

If you have any questions about home or business security, or if you have any special requirements, remember that we are here to help. Give us a call on 01273 475500 and we’ll provide you with free, expert advice.

This message was added on Thursday 19th January 2023