Home insurance Updated:
New figures from the AA show that typical home insurance premiums edged up in the three months to the end of June, marking the third consecutive quarter of growth. However, given that the 1.4% increase equates to a rise of just £2, premiums remain "remarkable value for money".
The British Insurance Premium Index found that the average Shoparound quote – which is an average of the five cheapest premiums available for a given customer – for a typical combined buildings and contents policy now stands at £158.48, while for a standalone buildings policy the average clocks in at £113.46 (up 1.5%) and £60.41 for a contents policy (up 3%).
Despite these slight increases, the typical combined premium is still around £30 lower than it was in 2010, so customers are still getting a fantastic deal.
Michael Lloyd, director of insurance at the AA, explains why it's such a great time for home insurance customers: "We have enjoyed a long run of generally benign weather – and while there have been some costly floods and damaging storms, they have been fewer and less costly than insurance companies expected." He said that premiums have been falling for some time as a result, but the latest rise shows that they're now bouncing back from historic lows.
"Rising premiums, I believe, reflect growing nervousness about potential severe weather claims which many climate experts predict. At the same time, the launch of Flood Re brings the very welcome availability of affordable home insurance to those in areas most prone to flooding… but this contributes to insurance company costs, which in turn is reflected in the relatively modest premium increases we have seen."
It's also interesting to note that the cost of contents insurance has risen faster than that of buildings insurance, which Michael thinks is the result of increasing home contents values and an unfortunate rise in fraud, such as false and exaggerated claims.
Despite the fact that rising home contents values could lead to higher premiums, it's vital to make sure you've got the right amount of cover. Don't be tempted to purposely under-estimate the value of your possessions: it may be cheaper in the short-term, but what if you need to make a claim? Not only is it fraudulent, but you may end up getting far less than you need to replace the necessary items.
However, it may not be an active deception. Michael adds that many households could unexpectedly find that they're underinsured, often due to new or expensive purchases that aren't factored into the insurance policy, so he urges customers to regularly check the value of their home contents to ensure they've got the necessary cover.
Once you know your value, it all comes down to shopping around and making sure you've got the right policy. If it's time to renew, don't automatically sign up with your current provider – what if there are better deals elsewhere? Use our home insurance comparison tool to check out a few alternatives, and see if you can get the cover you need for the price you want.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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