Is Your Home Insurance Punishing As Well As Protecting?

Controversy is once again looming over the insurance industry as a major national newspaper in the United Kingdom has been inundated with complaints from long-standing customers that are being hit with higher premiums simply because they have made a claim.

In particular, the home insurance industry has come under fire with one customer who had both buildings and contents insurance with Norwich Union making a modest claim following an accident involving a third party, only to be stung with a renewal quote that doubled his previous premium.

According to the research, this householder was not alone. Another reader claimed their home insurance premiums doubled after a garage fire, while another saw her annual premium jump from £230 to £645 after a flash flood, despite the fact that there was no history of flooding in the area.

The consumer association Which? has expressed outrage at this practice stating that it is unfair to loyal customers. However, given the fact that insurance premiums are based on risk, should we accept that premiums will increase as we make claims?

The arguments for and against a rise in home insurance premiums

All home insurance companies evaluate insurance premiums on a number of risk factors – meaning that the more likely the company is to have to make a payout, the higher your insurance premiums will be. So for example, if you live in a flood-risk area, or a high crime area, chances are your premiums will be much higher than someone who lives in a dry, low-crime region.

Indeed there are many steps that homeowners can take to reduce this risk level. For example, they can choose to fit flood defences, house alarms or other security devices and can often secure discounts by doing so.

Perhaps then, when, for example, a home is flooded in an area that wasn’t previously deemed at risk an insurer has a right to increase premiums – after all, if it’s happened once, it could happen again. The same could be true of a break-in – it could be a sign that the area’s crime rate is rising. As a result, some rise in the size of premiums is difficult to argue with.

However, where the issue becomes contentious is that many of the homeowners who have been stung by increased premiums have never made claims before. They have an immaculate record as homeowners, often weren’t to blame for the claim, and why should they really pay more for the service the home insurance company is supposed to provide? After all, customers pay home insurance year in and year out without anything in return – so why when it comes time to make a claim should they be punished for doing so? After all, this is the service they have been paying for with no return, for years.

To make matters worse, many homeowners are left with a net deficit by the time they pay out the excess on a claim. Insurers argue that the premium increases are based on the size and nature of the claim and that anyone unfortunate enough to make more than one claim within a five-year span is most likely to be stung.

So how can you cut your home insurance costs?

The time has come for consumers to take a stand against this practice by insurers – and if they’re unhappy, shop around.

Generally renewal policies increase on an annual basis and chances are that even if your home insurance deal was one of the cheapest around when you took it out, you could actually find a cheaper policy now that offers equally comprehensive cover. Use a comparison website to search the market and evaluate the options available to you.

The insurance market is increasingly competitive and there’s no obligation to accept the quote your existing insurer provides. If you do so, you’ll have few grounds for complaint.

However, if you’re happy with your home insurance provider’s service and don’t want to take a chance with another company then see if there are other ways to save cash. Enhancing security by joining a Neighborhood watch scheme or fitting a house alarm could help you save.

Also think about whether it’s worth making a home insurance claim in the first place. Evaluate the size of your excess and the amount the insurer would be paying above this total. It may be low enough that you’re actually better off not making a claim – and therefore hanging on to any no-claims discount your insurer may offer.