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Home insurance premiums are down to their lowest levels since insurers started keeping records – but these costs will rise.
Such an insurance consists of two parts: building insurance for the house itself and contents insurance for the belongings in it.
According to the Association of British Insurers, the typical home insurance premium will be £300 in 2022, down 6 per cent from 2021.
Average annual prices for individual buildings (£228) and contents policies (£116) were also at historic lows.
Part of the reason for the low rates is competition. But it also reflects a ban on what’s known as “price walking,” which was especially prevalent in the home insurance market.
Insurance Rising: Home insurance prices are set to rise this year due to higher claims costs
Price walking is when insurers charge renewing customers higher premiums than new ones. The Financial Conduct Authority regulator banned the practice in January 2022.
Home insurance renewals charged customers up to three times as much as new customers, so the ban reduced the cost of total premiums for the year.
But an increase in subsidence claims, an increase in frozen pipe payouts, and rising costs of building materials and labor could see home insurance premiums rise again in 2023.
Premiums may rise this year as insurers expect to pay more for claims after last summer’s heat wave, the ABI said.
There has also been an increase in claims for burst pipes following the December cold snap.
ABI managing director Laura Hughes said: ‘Last year was a stark reminder that the only predictable thing about Britain’s weather is that no one knows what it will do next. Insurers are always ready to support customers when the worst happens.
“Despite last year’s payments and an increase in the cost of building materials and labor, home insurers will continue to do everything they can to offer customers competitive offers.”
How to get a better deal on your home contents insurance
Consider switching instead of just renewing
The ban on price hike means that your current insurer may not charge you more for the same coverage than a new customer. But that doesn’t mean your current insurer is offering the best possible deal.
It may be worth trying a number of different comparison sites to cover all bases, as well as going straight to insurers.
Some insurers, such as Aviva and Direct Line, do not list their prices on comparison websites.
Lower your costs and risk
When it comes to lowering your insurance premiums, there are several steps you can take. First of all, it is wise to check the insured amount on your home insurance policy. It can be way too high and you can lower it and save money.
However, you should never skimp on this or artificially lower it, as you may be breaking your mortgage terms and will be underinsured in the event of a disaster.
Likewise, it is a mistake to underestimate the value of your content, as you will suffer a loss in the event of theft, loss or damage.
It is possible to reduce the costs of your home contents insurance by lowering your risk.
Participating in Neighborhood Prevention, installing better locks, having a burglar alarm installed or having better smoke detectors installed can all lead to lower insurance premiums.
Risk reduction: Actions such as participation in a Neighborhood Watch scheme can reduce premiums
You can also often get discounts of around five percent for a smoke detector, burglar alarm or deadbolt locks.
Some companies offer to cut customers’ premiums by as much as 15 or 20 percent if they install a sophisticated sprinkler system and a fire and burglar alarm that alerts the police, fire department, or other emergency rooms, but these can often be expensive up front.
Take advantage of no claims discount
Many of us are familiar with the concept of the no claims discount from our car insurance. This is where a history of not filing a claim can lower your premium.
This is also a growing feature of home insurance. Typically, households are asked if they have made a claim in the past during a certain period of time, and if they have not, they may receive a lower premium.
However, some insurers are now also making no-claim offers in the form of discounts that take this idea a step further.
This means that if you don’t file a claim, your premiums may be frozen when it comes time to renew. It’s an option worth exploring.
Premium Pitfalls: Remember there’s no point in getting a really cheap premium if the policy won’t cover you for what you need
Remember that cheaper is not always better
When looking for home insurance, it’s vital to remember that while you want to keep costs down, you also need the best possible coverage.
Insurance contracts vary not only in price, but also in terms of what is and what is not covered.
Any number of home disasters could potentially befall you, and you could end up with thousands of dollars out of pocket if you skimp on insurance.
When choosing an insurance policy, it is always best to consider the worst case scenario. A little extra in premiums will cost much less than a very expensive bill for your buildings or contents that isn’t properly covered.
Always make sure you read the fine print and exclusions on policies and compare equal against equal.
It is also wise to take a good look at the extras that an insurer offers you, such as useful extra services or the possibility to keep the premium low in the future.
When you receive policy documents, read them carefully and make sure all details are correct and everything you need is covered. Then at least you’ll be prepared if the worst happens.
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