Shop Around Premiums Fall For Home Insurance

If you’ve ever read an article offering tips to reduce your home insurance premiums then you’ve probably noticed a common theme. Nearly every one will advise you to ‘compare as many quotes as you can’ - whether it be online or through a broker. Now however, the effectiveness of shopping around has never been more apparent.

According to the AA British Insurance Premium Index, considered the benchmark for the industry in terms of analyzing premium trends, average home insurance premiums leapt in the final quarter of 2008. The average buildings insurance premium rose by 5.3 per cent and even though average contents insurance premiums dropped by 1.6 per cent, the premiums on combined policies also rose by 1.5 per cent. The average premium for a buildings insurance policy in the UK now stands at £218.04, compared to £122.98 for a contents insurance policy and £290.62 for a combined policy.

However, while the average premiums have generally increased, the average shop around premium has fallen.

The Index also carries a ‘shop around index’ where it looks at the cheapest three quotes available to each customer in a basket of 750 risks. It found that during the same period buildings insurance premiums had fallen by 0.7 per cent; contents insurance premiums dropped by a sizable 3.9 per cent; and even combined policy premiums fell by 1.1 per cent. The average shop around premiums now stand at £122.27, a saving of nearly £100, for buildings insurance; £67.14 - around half the price for contents insurance; and £184.04 for a combined policy - a saving in excess of £100.

Why are shop around premiums for home insurance falling?

It seems natural to assume that when average premiums increase the cheapest premiums will rise too. However, the gulf between the cheapest premium and the average premium has grown wider because of fierce competition within the home insurance industry.

Providers continue to offer highly attractive deals to new customers in a bid to win their custom. In particular the emergence of comparison websites has created greater transparency. Now it is easier than ever for consumers to compare policies like-for-like and to see what they could be getting elsewhere. That has forced home insurance providers to keep on top of the market and ensure they remain competitive.

However, signs are that this downward trend won’t last forever. Traditionally insurance premiums rise during a recession and with increased home burglaries it’s likely that claims will increase forcing insurance companies to heighten their premiums. At the moment however, it seems that this is offset by the fact that consumers are becoming more conscious than ever about value for money and are willing to take a thorough overview of the market before settling on a deal.

How can you keep home insurance premiums low?

Clearly the overriding message from these figures is that home insurance customers must shop around for policies. However, that doesn’t just apply to first-time homeowners - it applies to existing homeowners too. There are substantial savings to be made by moving to a new policy so don’t simply accept a renewal quote. Note down your renewal date and when it approaches take the opportunity to compare the market and see if you can find a cheaper deal elsewhere.

If you’re in the middle of a home insurance policy term and are therefore unable to move to a cheaper deal in the near future there are still ways to save. Get in touch with your home insurance provider and ask it to recommend a burglar alarm or other security device, for example. If you fit an approved security system you could earn a discount in the region of 10 per cent depending on the insurer.

Reducing a fire risk can also help you save. So if you have quit smoking as part of your New Year’s resolutions then let your insurer know - having no smokers in your house will almost certainly cut premiums. However, make sure you use this as an added incentive to keep away from cigarettes - because should a fire start in your home as a result of a lit cigarette after you have informed your insurer you no longer smoke, then you will almost certainly invalidate a claim.

It’s also worth reviewing the level of cover you have in place and determining whether there are any policy options you no longer need. Make sure your policy is up to date too, including any new contents that were brought into your home over Christmas.

Another way to earn cheap home insurance is to increase your voluntary excess. However, don’t set the bar at an unaffordable level in case a claim is necessary.