Cost of Home Insurance
How much will it cost?
The cost of household insurance can vary enormously – an insurance broker who knows the market will be able to select the best policy for you depending on your circumstances. Here are some of the factors that will influence the premium you pay:-
- The area you live in. Insurers use postcodes to determine the risk of an area in terms of crime and flooding risk for example
- The age of the home you live in
- Type of home you live in, especially if it is timber framed, has a thatched or flat roof, if it is listed or situated in a conservation area
- Policy coverage – Not all policies are the same and cover and therefore cost will vary
How can the cost be reduced?
- Policy excess – This is the amount you have to pay up front in the event of a claim. If you agree to pay a higher excess in the event of a claim your premium will be lower.
- Security – If your home is protected by an approved alarm and is well secured by approved door and window locks most insurers will give a discounted premium. For general advice on intruder alarms see this BIBA guide – click here and for physical security for homes see this document available from the RISCAuthority website – click here
- Neighbourhood Watch – If your home is in a neighbourhood watch area most insurers will give a discounted premium
- No claims – If you have not suffered any claims in the last few years you will usually qualify for a discounted premium
- Combined covers – Most insurers will offer a discount if you insure both buildings and contents with them
- Indemnity only contents policies – Most policies are on a new for old basis where the insurer either pays the full cost of repairing damaged items, or pays to replace them with new items if they are damaged beyond repair or stolen, except for items such as clothes. Indemnity policies will deduct an amount for wear, tear and depreciation. These policies offer savings but are not generally recommended as you may be much worse off in the event of a large claim
- Sum insured or bedroom rated – Often subject to a maximum sum insured a bedroom rated policy is rated on the number of bedrooms whereas with a sum insured policy it is rated on the sum insured you specify. It is not clear cut which will offer you the best value so it is worthwhile seeking quotes on each
How do I calculate the sum insured?
Building insurance – this can be done either on a bedroom rated basis (subject to maximum amounts of cover) or on a sum insured basis. In regard to the sum insured basis you will need to work out the rebuilding cost of your home. Note this is not the market price but the cost of totally rebuilding the property which should also include costs for demolition if required, clearance of the site and builders and architects fees. The Association of British Insurers has an online calculator to assist with this.
Contents insurance – this can be done either on a bedroom rated basis (subject to maximum amounts of cover) or on a sum insured basis. In regard to the sum insured basis you work out how much cover you need. It is essential that you correctly insure all the contents within your house. The easiest way to do this is to make a list of all the items, room by room and make a note of how much each item cost. An amount of inflation then needs to be added to the total value (your broker will be able to provide guidance on this), to achieve a replacement as new cost.
Most policies will include index linking which means that an inflationary amount will be added each year but you should update your insurance regularly to ensure that you are not under-insured.