In the past year or two, items concerning the rising building and household insurance costs for UK households have hit the headlines on numerous occasions. Sure, there are floods, catastrophes and robberies, but more than before? Unfortunately, somebody has to pay for the damage. Insurance certainly don’t have an endless supply of money and are still out to make a profit. Ultimately it is YOU the premium payer who will be stung with the increased premiums. Just because you live far above sea level and far away from the flooding – it doesn’t stop you contributing towards the cost somehow!
That said, the solution is definitely not avoiding taking out a policy – that would be crazy! Instead, the trick is to work out the type of insurance that best suits you and fits your needs. Always consider the power that reducing your basic spending has – even if it is only a few quid!
What kind of insurance do you need?
The first point to note is that there are two types of insurance related to buildings. The first, buildings insurance, covers damage to the building itself, while the second, contents insurance, covers the moveable items inside it. Home insurance is generally compulsory if you have a mortgage, because the bank will insist on securing their security on your loan. The contents element is not so compulsory, but extremely important for situations like a burglary.
Some providers, like Nash Warren’s household insurance, will also offer to bundle building and contents insurance under one policy.
For both types, but especially buildings insurance, it’s important to shop around to ensure you’re getting the best deal. The cost of your premium is related to the cost of rebuilding your home in the worst case scenario of it being completely destroyed by an event such as fire, explosion, flood or subsidence. That is not the same as the value you paid for it, which would also factor in the cost of the land itself and the desirability of the location. Not knowing this, a lot of people insure for a higher maximum cover than they need to. To avoid this you can use the Association of British Insurers calculator to arrive at an estimate of the rebuild cost for your home.
Finding an accurate quote
Generally, the insurers giving a more accurate quote take the most factors into account and not simply the number of bedrooms. Factors like the age of the house, the number of exterior walls, and the number of people living at the property also have an impact. Don’t be put off by the extensive questions that some comparison sites ask – these will all go into a clever algorithm to give you the most accurate pricing. You’ll also need a specialist policy if you’re insuring a farmhouse, listed building, self-build, or a second home which is empty for much of the year.
It could work out cheapest to have buildings and contents insurance as a single (combined) package, and the average cost in the UK for this is about £200 per year. However many people with contents insurance don’t realise that this only covers the theft of or damage to articles in the home. If you have a few very precious items that you carry with you outside, you should also insure them separately. The best way to estimate how much cover you need for your contents insurance is to walk through the house estimating the value of the items. For the average family of four, the value of house contents is believed to be around £55,000, but most people underestimate this figure. Make sure you don’t fall into this trap otherwise you could lose out in the nightmare scenario of a fire or flood damaging nearly all you possess. Also, remember that many bank accounts and credit cards come with extra features such as mobile phone insurance which you can avoid re-purchasing.
Finding the best deal
Price comparison sites are a good starting point when shopping the home insurance market. However due to the number of factors involved in determining a quote, you will have to go into the websites of individual providers and enter your precise details to find out how much they will charge you to work out the best deal for you.