NO TWO HOMES ARE THE SAME

When you take out a new home insurance policy, or renew an existing one, the amount you are required to pay has to be calculated based on a number of factors.

No two homes are identical which is why insurance premiums can vary depending on the property and your personal circumstances.

Here are some of the factors which could influence the price of your home and contents insurance.

1.       Your location

Your postcode is often the starting point for an insurance company in determining the cost of providing cover for your property.

Postcodes can be used to understand local crime rates, so if your area has a high prevalence of burglaries your insurance might be higher than areas with less crime. You can search for information about crime in your area on a number of websites including this official police site.

If you live in a more affluent area, it is likely that you and your neighbours will have more high value property and possessions which would be more expensive to replace in the event of any damage or loss.

2.       The value of your contents

Clearly, the value of your belongings will be crucial in determining your insurance premium as it will need to adequately cover any cost to repair or replace items.

Often items such as fine art and antiques might require a higher premium to protect them. If you are fortunate enough to own such high value items you may benefit from having them professionally valued.

3.       Property structure and size

Larger properties which require rebuilding will inevitably cost more than smaller properties so these potential costs will also need to be accounted for by insurance set at a suitable level.

Materials used in the construction of homes can be varied – from the typical bricks and mortar to wood or thatch. The material construction of your home will have an impact on your insurance as some are more easily damaged or more susceptible to deterioration.

Some materials may also be more expensive to replace or more difficult to source. Listed buildings or properties of special architectural design may require a more specialised type of insurance. Because they are potentially more complex than the more mass produced styles of homes, any repairs are also likely to be more complex and this has implications for insurance premiums.

Find out more about specialist home insurance.

4.       Security

Burglars tend to look for easy pickings so the more secure your home is the less likely you are to fall victim to this type of crime.

Effective deterrents include good quality doors and windows with the appropriate locks, outdoor lighting with motion sensors, and a visible burglar alarm. Valuable items in outbuildings can often be secured with ground anchors, while some homeowners also choose to install CCTV and a fitted safe.

Ensuring your home is fitted with smoke detectors and fire alarms may also be taken into account by your insurer when calculating your premium.

5.       Flooding risk

If you live in an area which is at risk of flooding, your insurance costs will usually have to reflect this risk. This might be evident from your proximity to a river or the coast, but even if you aren’t near natural water sources, surface flooding can occur from water running off hills due to excessive rainfall which can result in drains not being able to cope.

Following increases in the number of flooding incidents, the Government has worked with the insurance industry to come up with Flood Re – a scheme designed to help those with households who live in flood risk areas to find affordable home insurance.

6.       Your lifestyle

Insurance companies will often make assumptions about the level of risk presented to your home and its contents based on a number of lifestyle factors. These can include your age, profession, marital status, the number of children you have, and if you travel leaving the home empty for long periods.

Many people choose to work from home either on a permanent or occasional basis and insurers may be concerned with extra risk from things like visiting customers, as well as damage or theft of equipment or stock.

7.       Claims history

Typically, the more claims that a policy holder makes the higher insurance premiums they are likely to pay. This is because they are likely to be seen as a higher risk than people who haven’t submitted a claim or have submitted fewer claims.

8.       The excess on your policy

Often insurance customers will be asked what voluntary excess they would be willing to pay in the event of a claim and this would be likely to have an impact on the premium. A voluntary excess indicates the amount of the claim that you are willing to cover yourself – so if your claim is for £100 and you have a £50 excess, the insurance company would pay you £50.

So, if you were to opt for a voluntary excess of £500 it’s likely your cost of cover would be lower than if you had a £50 excess.

9.       Additional charges

Many insurance companies will impose additional charges or administrative fees.

These could occur when you need to make mid term adjustments to your policy, for example if you change your address, name or occupation.

Others might impose fees for paying by debit or credit card, or by choosing to pay in instalments by direct debit.

NFU Mutual does not charge fees in any of these instances for its home and contents insurance but customers of other insurers should check their policies carefully to make sure they don’t incur unexpected charges.

10.   Other external factors

There are some factors which are outside of an individual’s control which can still have an impact on insurance premiums.

Some of these are:

  • Severe weather: Prolonged periods of cold weather or rain can result in increased numbers of insurance claims. Should there be any long-term changes in the weather – such as climate change resulting in greater incidents of flooding – insurance companies would review the likelihood of future claims resulting from it and potentially increase premiums to reflect changes in levels of risk.
  • Increased repair costs: High-value technology is becoming increasingly popular in homes, from state-of-the-art mobile phones and tablets, to expensive gadgets operating in kitchens and throughout the home. This means it’s also getting more expensive to repair or replace these items and insurance premiums may have to reflect this.
  • Government policy: The insurance industry, like many others, can be affected by changes in Government policy and legislation. One recent example might be the Insurance Premium Tax increase – the tax paid each time an insurance policy is purchased in the UK. This went up from 6% to 9.5% in November 2015 and was increased further to 10% in October 2016.

Next steps

With so many potential factors influencing the insurance premium you pay it can be confusing. It may also feel a little disconcerting being assessed simply on which boxes you tick when providing data on a price comparison website when shopping for insurance.

NFU Mutual isn’t on price comparison websites because we believe our personal service results in a greater understanding of a customer’s needs and therefore insurance which is suited to their requirements.

To talk about your home and contents insurance needs, contact your local branch whose staff will be happy to discuss your options.