Last year, the UK’s average premium for building insurance increased by 1% to just over £205, and the average for contents insurance rose to £151, up 2%. But within the market, we’ve seen some much bigger rises—if you’re with Norwich Union, you’ll have seen your premium rise by around 6%.
So what’s going on? Every year, we see premiums rising. Surely, with so much competition in the home insurance market, you wouldn’t expect to see such inexorable rises in premiums?
Let’s consider the situation more carefully.
The cost of repairing and rebuilding houses is a reflection of the rising price of labor and building materials. This means that the cost to the insurers of claims under the buildings’ coverage also rises. So as their costs rise, so do your premiums. And there’s also the indisputable fact that cost inflation also affects the insurance companies own operating costs. They’re bound to add a little extra wherever possible!
Then there’s that lovely British weather. Michael Fish could be forgiven for believing we don’t live in a hurricane zone, but nevertheless, it’s a fact that storms, and especially floods, are becoming ever more frequent. Flood damage can be particularly destructive, with, according to the Association of British Insurers, the average insurance claim ranging between £15,000 and £30,000. And during the last 18 months, we have seen particularly destructive floods create headline news at Helmsley in North Yorkshire, Carlisle, and Boscastle in Cornwall. Those events must have cost the insurance companies millions.
The other area where costs have been rising is burglary. The average burglary claim has now risen to around £1,400. There seem to be two reasons: firstly, burglars are finding easy pickings and moving on. Modern family homes are packed with valuable electronic gadgets, from laptops to iPods, digital cameras, and flat-screen TVs. The other reason is that burglars are targeting well-off neighborhoods more and more.
Against this background, insurance companies are able to price home and contents insurance down to individual postcodes. If their records show a problem with flooding, subsidence, or an increased incidence of burglary in your immediate area, their computers will load your premium to reflect the additional risk.
Your no-claims discount will only serve to offset these upward pressures to a certain extent. And don’t forget that once you have a five-year no-claims record, your discount doesn’t increase; it’s capped. Thereafter, all the premium increases will land fully in your lap.
So what can you do to save money?
The most important step by far is to shop around every year for the best available deal. Maybe it’s a chore, but thirty or forty minutes on the Internet (including ten minutes on this website!) will yield you results. Within that space of time, you’ll have found the cheapest insurer, and, as an online customer, you’ll probably have qualified for an additional 10% discount. Then you can always agree to pay by direct debit—that’ll also trim off a bit more.
Of course, there are other things you can do, especially in the arena of home security. Join the local neighborhood watch scheme, install security locks on your windows, fit external security lighting, upgrade the locks on your doors, and get a burglar alarm. Added security will earn you discounts on your insurance but will cost you money to install! Perhaps the added peace of mind alone will be worth the cost. Only the local neighborhood watch scheme arrives for free!
The best general rule is to not stick with the same insurance company for too long. Keep them on their toes. They have a tendency to take loyal customers for granted. Yes, it really does pay to shop around—try it and prove it to yourself!
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