Home insurance premiums rise as insurers pass on weather claims and repair costs

The price of home insurance premiums is rising as insurers grapple with a spike in claims and increasing repair costs.

During 2022, these premiums fell to their lowest-ever level, due to competition and a regulatory ban on charging old customers more than new ones.

But now home insurance costs are on the rise again. The average premium for a combined buildings and contents policy was £315 in the first three months of 2023, up 6 per cent on the same period in 2022.

The average buildings-only policy cost £236 in the first quarter of this year, a rise of 5 per cent on 2022, according to the Association of British Insurers trade body.

For contents cover the average price of £117 is a rise of 1 per cent.

These premiums are going up because of a surge in insurance claims for weather damage last year.

The bad storms of February 2022 led to insurers dealing with 170,000 claims for property damage, paying out £473million in claims so far.

That was followed by last summer’s record-breaking heatwave, which caused a significant rise in subsidence.

Insurers expect to pay £219million for subsidence claims made in 2022. 

The cold snap in December 2022 caused a wave of frozen pipes, which in turn meant water leaking as pipes burst. 

Meanwhile, the increasing cost of repairing damaged homes is also being paid by consumers in the form of higher premiums.

The ABI said construction costs rose by 15 per cent in 2022. 

Reasons for this rise include the war in Ukraine, leading to a surge in energy prices, and a shortage of raw materials resulting from factory closures during Covid-19 lockdowns.

ABI manager, general insurance Laura Hughes said: ‘Insurers appreciate these continue to be tough times for many households coping with the rising cost of living. 

‘The rise in the average combined buildings and contents premium over the last year remains under the inflation rate, despite the above inflation rises in the cost of many building materials.

‘During these challenging times, anyone worried about being able to continue paying their home insurance should speak to their insurer about any alternative payment options that may be available.’

How to save money on your home insurance 

Consider switching, not renewing 

Financial regulations mean your current insurer cannot charge you more than a new customer for the same cover – but that does not mean your current insurer is offering the best possible deal.

It could be worth trying a couple of different comparison sites to cover all bases, as well as going to insurers direct.

Some insurers, such as Aviva and Direct Line, do not list their prices on any comparison websites.

Switch and save: Calling insurers or checking prices online could mean you find a better deal

Cut your risk – and your premium 

When it comes to cutting your insurance premiums, there are several steps you can take. Firstly, checking the sum insured on your buildings insurance is wise. It could be far above the actual cost of rebuilding your home were the worst to happen, and you could reduce it and save money.

However, you must never skimp on this or artificially lower it, as you may be breaking your mortgage terms and will find yourself underinsured if disaster strikes.

Similarly, understating the value of your contents is a mistake, as you will lose out in the case of theft, loss or damage.

It is possible to reduce your contents insurance costs by lowering your risk, however.

Joining a Neighbourhood Watch scheme, fitting better locks, having a burglar alarm installed or getting better smoke alarms can all reduce insurance premiums.

You can also often get discounts of around five per cent for a smoke detector, burglar alarm or dead-bolt locks.

Some companies offer to cut customers’ premiums by as much as 15 or 20 percent if they install a sophisticated sprinkler system, and a fire and burglar alarm that alerts the police, fire or other monitoring stations, but these can often be expensive upfront.

Get a no-claims discount 

Many of us are familiar with the concept of the no-claims discount from our car insurance. This is where a history of not making a claim can reduce your premium.

This is a growing feature of home insurance, too. Typically, households are asked whether they have made a claim over a set period of time in the past, and if they haven’t then they could get a lower premium quote.

However, some insurers are also now making no claims discount-style offers that take this idea a step further.

This means that if you do not make a claim, your premiums could be frozen when the time comes to renew. It is an option well worth investigating.

Cheaper is not always better 

When hunting for home insurance it is vital to remember that, while you want to keep costs down, you also need the best cover possible.

Insurance deals vary not only in price, but in terms of what is covered and not covered.

Any number of home disasters could potentially befall you and you may end up thousands of pounds out of pocket if you skimp on insurance.

When picking an insurance policy, it is always best to plan for the worst case scenario. A little bit extra on premiums will cost far less than a very expensive bill for your buildings or contents not being covered properly.

Always make sure you read the small print and exclusions on policies, and compare like with like.

It also makes sense to take a good look at the extras that an insurer is offering you, such as helpful added services, or the opportunity to keep premiums low in the future.

When you get policy documents, read through them carefully and make sure all details are correct and everything you need is covered. Then, if the worst happens at least you will be prepared.