How to Keep Home Insurance Costs in Check

Homeowners have had a rough ride since the onset of the credit crunch. Not only have mortgage rates risen steeply, but energy bills have also increased and insurance costs too have been on such an upward trend that many have considered sacrificing their policies altogether to save some cash despite the risks involved.

Home insurance is a typical example with the AA British Insurance Premium Index revealing that the average quoted premium on a buildings insurance premium increased by 50p in the first quarter of 2009 to £218.53. While the increase may not seem too significant on its own, it actually represents the eighth successive quarter in which buildings premiums have risen.

The average quoted contents insurance premium rose more sharply – by some £3 to an average of £126.34.

Why are home insurance premiums rising?

There are several reasons why home insurance premiums have been increasing on the whole.

One justification is the harsh winter in the UK, which lead to an upsurge in claims due to snow and ice damage. The legacy of the floods in 2007 is still being felt in the home insurance industry too, when companies were forced to pay out more than £3billion in claims. Furthermore, even though house prices have been increasing, the cost of rebuilding and repairing homes has actually risen because of the higher standards that are required by building regulations.

Contents insurance premiums meanwhile, which had actually been on a downward trend, have increased primarily due to the rise in the number of domestic burglaries. There has also been a record rise in the number of fraudulent claims made - last year, the industry detected 55,000 false or exaggerated claims. This is thought to be prompted by the recession.

Is it possible to reduce home insurance premiums?

The good news is that there is a significant gulf between the average quoted premium and the shop around index. The shop around index indicates the average of the three lowest quotes customers receive when shopping around showing how it is possible to save a significant amount of money.

For example, the average shop around premium for buildings insurance is just £127.82 a year - nearly £100 cheaper than the overall average. The shop around average for contents insurance meanwhile stands at £70.40 – nearly half the average quoted premium.

The simplest way to shop around for home insurance is with one of the many online comparison websites - these will save you the effort of shopping from insurer to insurer. By entering details about you and your home into their online forms they will retrieve quotes from potentially more than 40 home insurance providers with one search so you can be sure you’re getting a competitive deal.

The key is to not just use these tools when you first take out home insurance. Instead use them every year at renewal time and don’t be afraid of regularly switching from insurer to insurer. Doing so will give you the chance to capitalise on discounts that are only available online to new customers.

How else can you cut home insurance costs?

Even if your home insurance policy isn’t up for renewal, you can still save money with your existing home insurance provider if you take steps to reduce the risk you pose.

Insurers base their premiums on risk. So, for example, if you live in a flood risk or high crime area you’re likely to pay more each year for cover because it is more likely that the insurer will have to pay out on a claim. Though you can’t do anything about how bad the weather is in your area or how high the crime is, you can offer more protection to your property which an insurer will acknowledge through discounts.

Contact your local authority and ask it about the flood defences that are available. If you’re in a high crime area make sure your property has a burglar alarm and time-switch lights. It’s also worth joining a Neighbourhood Watch scheme as this could slash your premiums by around five per cent. Protecting yourself against home fires with smoke detectors, fire extinguishers and even by giving up cigarettes could also earn you a neat reward.

Don’t make claims for small, relatively inexpensive events, as you could save as much as 60 per cent over five years with some insurers if you build up a no-claims bonus. Finally, take a look at the policy excess on your home insurance policy and consider how much you could comfortably afford to cover in the event of a claim – the higher you set the excess limit, the more likely you are to enjoy cheap home insurance.