How much is home insurance on average and what does it cover?

Updated 03 December 2020

6min read

Nick Green

Financial Journalist

Updated 03 December 2020

6min read

On average, a typical UK home is worth around £230,000 and contains some £35,000 worth of goods – which is what makes home insurance so important. The average cost of it isn’t huge (between £146 and £152 per year) but the cost of not having it can be disastrous.

Here’s an introduction to the different kinds of home insurance and how to choose the best cover for yourself.

What is home insurance and how does it work?

Home insurance is a type of insurance policy that covers your home in the case of fire, flood, damage or theft of contents. You’ll pay a premium based on your level of cover and risk, allowing you to make a claim when needed. There are three types of home insurance:

• Buildings insurance: This protects the physical building – the outer structure, fixtures and fittings of your home. It covers anything that can’t be removed, like doors and bathtubs (though swimming pools may be excluded). The average buildings-only policy costs £113 per year, but this price won’t stay static. It’s subject to annual increases and, in the UK, premiums have increased every year since 2017. Buildings insurance is a legal requirement unless you own your home mortgage-free – and even if you do, it’s considered reckless not to have it.
   
• Contents insurance: This protects your belongings in the house, garage and shed, such as furniture, white goods or televisions. The average cost of contents-only cover is between £59 and £66 per year. Tenants who rent property or buyers who only own a property’s lease will only need to take out this insurance, since the buildings insurance will be handled by the owner or freeholder. Given the low cost, it’s worth having unless your possessions really are limited.
   
• Combined buildings and contents insurance: This policy combines the two and, as a result, is often cheaper than having two separate policies. It’s suitable for freeholders who live in their homes, and averages between £146 and £152 a year.

You can pay your premiums monthly but paying annually is cheaper, saving you up to 6%.

What factors influence the price of combined home insurance?

In general, the riskier the property, the higher the premium. A risky property is one in a high-risk area for extreme weather, or one deemed an easy target for burglary (though you can install insurer-approved security systems and locks to lower the price). Terraced houses and flats are rated riskier, since floods and fires can spread more easily. Older buildings are also more expensive to insure – especially those built between 1850 and 1940 – since ageing structures are more likely to result in damage claims.

Everything from the material of your home to its size to its location (city, town or countryside) will have an impact on the price of your combined home insurance. For example, a primarily wooden property is likely to push up the price of your premiums as it is a greater fire risk, while a home in a city centre location is more likely (in an insurer’s eyes) to be burgled or vandalised. The value of your contents will also increase how much you’re going to have to pay.

Your insurer may also look at your lifestyle when working out the cost of your policy, including factor like your smoker status, whether you have children and whether you spend extended periods away from home. Your claims history can also impact both your eligibility and how much you pay, as insurers are likely to be suspicious of people with lots of previous claims, even if they are completely legitimate.

When you apply for home cover, your insurer will examine the area and incidents related to fire, flood and burglary within that postcode, as well as the factors listed above. They will then offer you a price based on your risk profile.

What are the regional differences in home insurance premiums?

The greatest factor affecting premium price is where you home is located. Premiums (and their yearly increases) for houses in urban, wealthier areas are higher, since insurers deem the risk of break-ins greater.

Here’s a breakdown of average premiums by region, according to Consumer Intelligence:

What does home insurance cover?

As a guideline, buildings-only insurance covers the bricks and mortar of the house, i.e. any building materials, fittings and fixtures that cannot be removed from the property without damaging it. Contents-only insurance covers the belongings inside, including smaller fixtures that you can remove like light fittings and carpets.

Each policy is different, but home insurance generally covers both the building and contents against damage from storms, earthquakes, flooding, fire, lightning, explosions, falling trees, motor vehicles, riots, vandalism and theft. It can also cover damage from burst water pipes, leaking oil heaters and even sinkholes.

What doesn’t home insurance cover?

There are a few instances when most a home insurance providers won’t pay out. These include:

1. General wear and tear on home and goods
2. Damage or loss due to terrorism (though you can usually add this for an additional cost)
3. Damage or loss of personal possessions, like mobile phones, tablets, laptops and smartwatches. Any gadgets you regularly take outside the home need separate cover.
4. If your home has been vacant or unattended from more than 30 consecutive days in a year (some policies have a five-day rule in winter, unless you turn off the water supply and maintain a minimum temperature indoors to prevent damage while you’re away).
5. Claiming for damage on extensions to the home, where you did not communicate these extensions (such as adding a conservatory) with your insurer and add them to your cover.

Items like outdoor fences, gates, paths and swimming pools are generally not covered, but you may be able to include them in your policy for an added premium.

How much home insurance do I need?

How much house insurance you need depends on whether you’re a freeholder taking out buildings-only or combined home insurance, or a tenant taking out contents-only cover.

For each, there are a few useful tips to help you calculate your level of cover:

• For buildings-only insurance, calculate the rebuild value of your home, not its selling price. Using the market value will result in you over-insuring yourself. Work out how much your home would cost to repair in the event of damage, including building materials and labour. Industry experts recommend doing an assessment of your rebuild costs every five years to ensure you’re adequately covered.
• For contents-only insurance, visit each room, decide which items are worth insuring, estimate their replacement price and add everything together. Importantly, estimate the prices you would pay if you had to buy the items new. Don’t use the original prices you paid, since home insurance provides new-for-old cover on belongings. If you purchase new and valuable items after you’ve taken out your policy, call your insurer to add these items to your cover.

The AA also has a free home insurance calculator online, which you can use to estimate the value of your contents.

Who has the best home insurance and how can I get the best deal?

To find the best home insurance providers and deals, you can use online comparison websites. However, an independent financial adviser is your best option for finding the most suitable deal. They’ll combine their market expertise with a knowledge of your financial needs, to ensure you have the exact cover you need at the best possible price.

To get the best deal, it’s also important to review your policy every year. Home insurance policies have seen sharp annual increases, so you’ll want to see the new figures before renewing. Opt out of auto-renewals, so that you and your IFA can re-evaluate each year.

Other FAQs about home insurance

Can I cancel home insurance at any time?

You can cancel home insurance policies at any time. If you cancel within the first 14 days of taking out the policy, you’re entitled to a full refund. If not, you can still cancel, but won’t receive back any of the premiums paid to date.

What is accidental damage cover and is it worth it?

Cover for accidental damage isn’t always included in home insurance policies. Often, it’s an optional extra on top of your policy, for an additional premium. It offers protection should your home and contents be damaged by an unforeseen, one-off incident – like spilling wine on a carpet or knocking a ball through a window. Damages are often minor, so accidental damage cover isn’t always worth it. Unless you have expensive rugs and furnishings, consider paying the repair costs yourself, preserving your no-claims bonus and keeping premiums lower.