How we calculate your home insurance price

We look at a variety of different factors when calculating the cost of your home insurance. Some are individual to you and some are down to wider or external factors. Sometimes your home insurance price may change when you renew and you may be wondering why.

Individual factors

• Where you live

The location of your home plays an important role in calculating the price. We use it to calculate the likelihood of flooding or burglary, and these can change each year depending on flood mapping and crime rates. We also use it to calculate other important factors such as the distance to fire stations.

• Your type of property

The age and the size of the property are used to calculate how much it will cost to rebuild or repair in the event of a claim. Older buildings were built to different building standards, for example they may use copper water pipes rather than plastic.

• When it’s occupied

If your home is unoccupied there is a greater risk of burglary or damage should a pipe burst. If it’s occupied all the time, there is more likely to be accidental damage.

• Claims you’ve made

Depending on the size and type of claim, making a claim could lead to an increase in premium. Similarly, each year you renew your policy without making a claim you will receive a No Claims Discount. You reach your maximum discount after four years.

• Any changes you make

If you make any changes to your policy either at renewal or during the previous year, such as adding or removing items to your contents, this could impact your price.

• Changes in pricing

We regularly review our pricing rates for key pieces of information you give us, like the type of house and date it was built. If there has been a change in our expectation of the number and size of claims, we will adjust our prices accordingly. This means prices for some customers will increase whilst for others it could fall.

• Mutual Bonus

Unlike many other insurers, we reward our loyal customers who renew their home insurance with us. We do this through Mutual Bonus, which for more than 20 years, has provided our customers with a saving on their home insurance. The longer you’ve been with us the more you save.

Other factors

There are several wider, external factors which impact premiums, some of which we have little to no control over.

• Inflation of rebuilding and repairing costs

Costs associated with home rebuild and repairs will have an impact on a customer’s premium. Due to inflation, the costs of rebuilding or repairing homes increases each year. During periods of high inflation in the supply chain, as we are experiencing now, these increases can be significant. Advanced technology also means replacements and repairs of contents inside your home can be increasingly expensive.

• Weather

Storms and other spells of severe weather increase the number of claims we receive. Although we set prices based on the long-term average, so one year of bad or good weather is unlikely to change our perspective, climate change is increasing the number of flood and storm claims we receive. 

• The overall cost of claims

It’s not just an individual’s claims history that affects individual renewal prices. The basic concept of insurance is that the losses of a few are paid for by the contribution of many. If lots of people claim on their home insurance the pot must go further, which means prices increase for everyone.

• Fraud

Unfortunately, fraudulent insurance claims can affect prices for honest customers. At NFU Mutual, we have specialist counter fraud technicians in both claims and underwriting, as well as subscriptions to industry-wide databases that are used to help share data to prevent and detect fraud.

• Taxes

Insurance Premium Tax is a tax on all general insurance premiums paid to the government. The standard rate of IPT is currently 12%.