Friday, 08 July 2016
How is my home insurance premium calculated?
A combination of factors determine your final premium. Ultimately, the amount you pay is calculated based on the risks associated to you and your home. For instance, location, construction type, property size, your occupation, your claims history, the value of contents you own, the security measures at your house, proximity to water and several other risks.
The information you give us about you and your property when taking out a quote is then layered with additional data from external sources, such as the Environment Agency. This enables us to offer quotes that are based on your individual specialist needs.
When issuing insurance, an underwriter will assess the risks that could cause a loss. Underwriters must also ensure that the company does not take on risks greater than it can afford; this could mean refusing to insure those who are more likely than average to experience a loss.
In essence, the higher the risk of damage or loss to your property, the more you have to pay to protect it. Influences affecting the final price will depend on the type of insurance policy you have. After all, a holiday home in Cornwall with a history of flooding is not subject to the same risks as a Victorian townhouse undergoing renovations in central London.
Why has my premium increased at renewal?
Usually, a change in circumstances is the root cause. Most homeowners renew their cover annually, and a lot can change in a year. You might have taken in lodgers, or moved jobs, or made a claim, and all of these incremental changes eventually add up. The company that you are insured with could also have gone through internal changes, such as adopting a new method of calculating risk or purchasing a new feed of external risk data. A business change like this eventually affects all customers.
What’s more, there are some external factors that can impact your insurance premium at renewal. Many of these are even beyond your insurer’s control.
For example, in 2015, the Government introduced an increase in Insurance Premium Tax (IPT) to 9.5%. Then, in April 2016, Flood Re launched, which is a scheme to make flood insurance more accessible across the UK, and which is funded by a levy that is shared across all policies. On 1st October 2016 IPT increased to 10%.
Best value for money, says Piers M on Review Centre:
"Stress free value for money home insurance easily renewed. Good service and everything fully explained. Have used them for a number of years."
How can I lower the cost of my home insurance?
Essentially, to lower your premium you need to lower the risk to your property. You can take several steps to do this:
- Install a monitored burglar alarm
- Purchase a safe to store all your valuable items
- Make sure there are insurance approved locks on all accessible doors and windows
- Calculate the right amount of cover you need to replace all your belongings
- Insure the cost of rebuilding your property, not the amount you bought it for
- Increase the voluntary excess you are willing to pay in the event of a claim
- Buy buildings and contents insurance at the same time
- Remove additional cover options, such as lost key cover or legal expenses
Remember to tell your insurer if there is a change in your circumstances at any point throughout the duration of your policy. This could be if you purchase a new expensive item of jewellery, or start working from home. This is not only important for ensuring that you are properly insured for the right circumstances at all times, but it can sometimes affect your price.
Excellent customer service from @homeprotect_uk Five minute call and saved almost £100 off my annual premium.— Andy Cowan (@tuppenynudger) March 8, 2016
Frequently Asked Questions
I haven't changed anything. Why has my premium increased?
External factors or changes to the business model can impact your renewal price. Your insurer may have changed the way that their underwriters assess and price risks, or the company may have changed the data sources used.
I'm an existing customer. Who can I talk to about renewing?
To discuss your renewal price please call us 0330 660 1000. A customer service agent will be happy to help.
How do I make a complaint?
We take customer satisfaction very seriously. If you would like to raise a formal complaint, please email email@example.com
We hope that we’ll be able to resolve the matter to your satisfaction but if you’re still unhappy when you receive our final response, you can refer your complaint to the Financial Ombudsman Service.