A simples guide

Why do home insurance premiums increase?

In households up and down the country, the reaction to home insurance renewal letters is probably the same – disbelief and more than mild irritation that it’s gone up…again. Even though you’re still in the same house, with the same belongings and still don’t own anything you think is worth pinching. So, why do premiums seem to increase every year – we’ve dug deep to try and get to the bottom of home insurance price rises.



Why does my home insurance price increase?

In a perfect world, we wouldn’t have to pay more than we need to for anything. Sadly though, we live in the real world (well, most of us do) and insurers aren’t just our saftey nets, they’re businesses too and they’ve got to make a profit. As with all business costs, some may get passed onto customers – such as for staff and facilities – if rent and wages increase then that need has to be met.

Add to this, insurance fraud which the ABI estimates costs the industry £1.32 billion in 2014. As a result, insurers spend at least £200 million every year identifying and investigating fraudsters. And it’s customers that share that burden with fraud costing us an additional £50 on every premium.

The government also increased Insurance Premium Tax from 6% to 9.5% in November 2015 which has had an impact on most policy types with some insurers passing the cost on to customers. The increase affects 20 million home insurance policies and adds an average of £10 to the cost of building and contents cover. As the tax is levied on car, pet and private healthcare insurance, some households will see the cost of their various insurance policies rise by almost £100** in total. Although you won’t have to pay anymore for your travel insurance (that’s already levied at 20%) and if you have your own rocket to the moon – then have no fear, spacecraft insurance hasn’t been affected either.


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home insurance

Have the recent floods and storms affected home insurance premiums?

Yes, total payouts to families and individuals could reach £1.3 billion – more than 3,000 families were affected by floods with their insurance covering the cost of alternative accommodation and repairs to property.

In response, insurers have been hit with a flood levy in order to pay into a fund that will help try and keep insurance costs down for those with increased flood risk. Some insurers will pass that cost on and customers are likely to see a rise in home insurance costs.

You might be surprised to know, that the last few years had seen a reduction in the average cost of home insurance but the increase in Insurance Premium Tax and the cost of covering current and potential flood damage, means that premiums are now an average of £316 for home and buildings insurance – a rise of around 1% compared to the same time last year.

Don’t stick around – loyalty will cost you

Another reason why your home insurance might increase every year is simply because you let it. Many insurers have an ‘auto renew’ facility which some of us probably have no recollection of signing up to. But it’s a great way for insurers to keep their audience captive – most of us are too busy (or let’s be honest – too lazy) to take time out and compare the market for top deals – we simply rely on our current insurer to give us their best price and by the time we’ve realised it’s time to renew, the 14 day cooling off period has ended and we resign ourselves to being charged whatever our provider has decided. But if you did compare the market with us, like almost a third of our customers we could save you an average of £106.82¹ and a lucky 10% of you could save up to  £225.58** on your home insurance – so why not see what you could save – your wallet will thank you for it.

¹ On average 32.94% of new buildings and contents insurance customers achieved this saving with comparethemarket.com, according to independent research carried out by Consumer Intelligence during May 2016.
² Based on Online independent research by Consumer Intelligence during August 2016. 10% of consumers could achieve this saving on their Buildings and Contents insurance with comparethemarket.com.

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