Every time you receive the renewal for your buildings and contents insurance, the price seems to have risen. Even if you haven't made a claim and you live in the same property, it often feels as if the cost of cover goes up every year.
Understanding what factors affect your home insurance premium can help you to reduce the cost of cover. Here are 11 of the key factors that affect the price of your insurance.
Your postcode
One of the first things an insurer will consider when deciding on the cost of your home insurance is your postcode and address.
Public data about the area surrounding your home is widely available, and insurers use this to price your policy.
For example, if your area has a higher than average burglary rate then this may be reflected in your premiums. An insurer will also consider the average claims cost in your postcode area and the future claims they expect to see in your neighbourhood.
The type of property
The type of property you own, and its construction, also influence the cost of your cover. Detached homes present different risk levels than terraced homes or flats.
For example, a terraced property is generally less at risk of subsidence, so may be cheaper to insure.
Insurers will also want to know about:
- How much of your roof is flat – if you have a large flat roof there may be issues with water pooling and subsequent damage
- The materials used in your home's construction – if your home is timber framed or has a thatched roof then there may be more risk of fire and so your premiums may be higher. Similarly, any use of non-standard materials that may cost more to source or repair could also result in a higher premium.
The flood risk
In recent years, flash flooding has affected many areas of the UK and made the news headlines. Only this month a Derbyshire village had to be evacuated after severe storms damaged a dam, threatening water damage to hundreds of homes.
The likelihood of your home being flooded will play a part in the pricing of your home insurance cover. If your home is located in a flood risk area, your premiums will be higher.
Homeowners in at-risk areas should still be able to arrange cover thanks to a new scheme called Flood Re, which was set up to help households who live in a flood risk area find affordable home insurance.
How much cover you want
The exact amount of cover you need will determine what your buildings and contents cover actually costs. It follows that if you are insuring an expensive home, or large sums of contents, then your policy will cost more.
Ensuring you have the right amount of cover can help you to keep the cost down. Work out what it would cost to replace the items in very room of your home in the event of a flood or fire, and you'll have a much more accurate idea of how much contents insurance you need. You'll pay a more accurate premium, and it will also help you to avoid the danger of being underinsured.
The general cost of goods
The cost of goods in your home is rising. Whether it's a new carpet or a new TV, products are getting ever-increasingly expensive.
That means it's getting more expensive to fix or replace them. Consequently, this increases the cost of your insurance and the price you pay.
The type of claims being made
If the type of claims that an insurer receives changed, their prices are also likely to change.
Here's an example from Aviva. The average cost of 'escape from water' claims the insurer dealt with in 2016 was £2,900. If that figure rises or falls, it's likely that home insurance prices will too.
Aviva say: "We estimate how much we're likely to pay in future claims, and incorporate this cost into customers' prices."
Your home's security
When you complete a proposal form, an insurer will always ask how secure your property is. This will include things like:
- what locks you have fitted on your doors
- whether you have window locks
- whether there is an alarm in place
- whether you live in a Neighbourhood Watch area
As a general rule, the more secure your home is, the lower your premium will be. And of course, the better the security you have in place, the less likely it is that you will need to make a claim.
You
When you apply for buildings and contents insurance, an insurer will ask a lot of questions about you as a homeowner or tenant. This is because your lifestyle can affect how likely you may be to make a claim.
For example, if you spend large periods of time away from the home, it may be more at risk of burglary and so the premiums will be higher. Similarly, smokers will typically pay higher premiums as their homes are statistically more at risk of fire.
Your claims history
In line with other types of insurance, your own claims history is also taken into account.
So, if you have made home insurance claims in the past few years, you will generally pay more for your cover.
Changes to Insurance Premium Tax
From time to time, the government changes the rate of Insurance Premium Tax (IPT).
For example, the rate of IPT rose from 9.5% to 10% in 2016, and then rose from 10% to 12% in June 2017. Any future increase in the tax rate will affect your premium.
What insurance you buy
The cover you buy can also affect what you pay. Some insurers will give you a discount if you purchase both buildings and contents insurance, meaning you can save money on your premiums if you decide to combine your cover.