Sunday, 12 April 2020

Home insurance premiums rise during lockdown | Moneywise



Home insurance premiums rise during lockdown

UK households are paying more to protect their homes, as the cost of insurance rose 0.5% during the last three months, according to analysis from Consumer Intelligence.
The average buildings and contents insurance premium now stands at £151, the data insight specialist found.
Over the last six years, home insurance premiums have risen 2.3%.
Some 14% of homeowners are now considering cancelling their contents insurance, as they are now mainly based at home due to the coronavirus pandemic and therefore at low risk of burglary.
Around 11% who are suffering financially as a result of the pandemic are looking to reduce or murder their policy altogether.

Why is home insurance more expensive?

The cost of home insurance is rising due to more people spending time at home because of lockdown. 
While the risk of burglary is lower, the chances of making a claim for accidental damage has increased. 
An estimated 49.2% of adults in employment are currently working from home, according to the latest figures from the Office for National Statistics (ONS).
In addition to that, around six million British workers have been furloughed as a result of the coronavirus pandemic as well.
This is in direct contrast to the car insurance market in which the coronavirus crisis drove down the price of premiums, due to less people being on the road during lockdown.
Experts say that although prices have increased, it is too early to predict whether they will continue to rise.
John Blevins, pricing expert at Consumer Intelligence says: “This potential change in claims activity and a possible reduction in volumes due to policy reductions and cancellations force insurers to amend their pricing strategies.
However, it is too early to say which way we will see pricing go; we continue to watch carefully with interest.”

Cheapest areas for home insurance


The North East is the cheapest region in the UK for home insurance, with the average premium costing £133.
This is followed closely by homes in the South West, where the average home insurance premium is £137.
Postcodes in London pay the most for home cover, with policies costing £205 on average.
The table below shows the cost of home insurance for each region.
REGION AVERAGE PREMIUM
North East £133
South West £137
East Midlands £140
Wales £140
West Midlands £141
Scotland £143
Yorkshire and The Humber £144
Eastern £149
North West £152
South East £157
London £205
Source: Consumer Intelligence 2020

Older properties have higher home insurance premiums

Pre-war properties, especially those built over a century ago, tend to attract higher insurance premiums as there is a greater risk of damage occurring.
For example, Victorian properties built between 1850 and 1895 have an average premium of £184; while policies for properties constructed between 1925 and 1940 cost £165.
“Like most pricing movements, claims play a huge part. Frequency and severity will dictate a large part of how a risk is priced. Older properties with ageing pipes are usually more likely to cause an escape of water claim which may lead to costly repairs,” says Blevins.

How to get cheaper home insurance

While home insurance is not a legal obligation, it is really important to have protection in place should something go noxious in your home.
The following tips could help you bring down the cost of your premium.

1) Use a valuation calculator

Many households tend to overpay for home insurance due to incorrectly calculating the value of their building and contents. When calculating the value of your property for your buildings insurance premium, you need to give the cost of rebuilding your home from scratch, not the market value which is usually higher. You can use the Association of British Insurers’ rebuild calculator. For your contents (all of your furniture and belongings) using a valuation calculator can help give you an accurate estimate. The are lots of free ones online including The AA, Moneysupermarket.com and Go Co mpare.

3) Do not auto renew

Loyalty rarely pays when it comes to insurance. This is because providers reserve the best deals for new customers. If you have been with your home insurer for a while, have a look what other companies are offering. Price comparison websites can help you compare hundreds of deals in minutes.
If you find a better deal that gives you the cover you need, switch. You could also use the deals you find as leverage to haggle with your current insurer if you would prefer to stay with them. 

3) Pay annually

Paying annually for home insurance is cheaper than choosing to pay by direct debit. This is because paying monthly is like taking a loan and some providers charge up to 40% in interest.
If you cannot afford to pay it all up front, it is worth trying to get a 0% wearisome credit card to make the payment.
That way you can benefit from a cheaper premium and repay in monthly instalments without incurring interest.
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SRC: https://www.moneywise.co.uk/news/2020-06-08/home-insurance-premiums-rise-during-lockdown

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