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.
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:
You can pay your premiums monthly but paying annually is cheaper, saving you up to 6%.
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.
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:
Region |
Average premium for combined home insurance |
Premium increase (year-on-year) |
London |
£205 |
6.8% |
South East |
£157 |
6.1% |
North West |
£152 |
2.8% |
East of England |
£149 |
5.5% |
Yorkshire |
£144 |
2% |
Scotland |
£143 |
5% |
West Midlands |
£141 |
3.3% |
East Midlands |
£140 |
2.9% |
Wales |
£140 |
1.3% |
South West |
£137 |
4.9% |
North East |
£133 |
1.6% |
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.
There are a few instances when most a home insurance providers won’t pay out. These include:
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 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:
The AA also has a free home insurance calculator online, which you can use to estimate the value of your contents.
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.
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.
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.
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