Insurance World

Last year the UK’s average premium for Buildings Insurance increased by 1% to just over Ј205 and the average for Contents Insurance rose to Ј151, up 2%. But within the market we’ve seen some much bigger rises – if you’re with Norwich Union you’ll have seen your premium rise by around 6%.

So what’s going on? Every year we see premiums rising. Surely with so much competition in the home insurance market, you wouldn’t expect to see such inexorable rises in premiums?

Let’s consider the situation more carefully.

The cost of repairing and rebuilding houses is a reflection of the rising price of labour and building materials. This means that cost to the insurers of claims under the buildings cover similarly rises. So as their costs rise, so do your premiums. And there’s also the indisputable fact that cost inflation also affects the insurance companies own operating costs. Wherever possible, they’re bound to add a little extra on for that!

Then there’s that lovely British weather. Michael Fish could be forgiven for believing we don’t live in a hurricane zone, but nevertheless it’s a fact that storms, and especially floods, are becoming ever more frequent. Flood damage can be particularly destructive with, according to the Association of British Insurers, the average insurance claim ranging between Ј15,000 and Ј30,000. And during the last 18 months we have seen particularly destructive floods create headline news at Helmsley in North Yorkshire, Carlisle, and Boscastle in Cornwall. Those events must have cost the insurance companies multi-millions.

The other area where costs have been rising is burglary. The average burglary claim has now risen to around Ј1,400. There seem to be two reasons – firstly burglars are finding pickings easier to come by and move on. Modern family homes are packed with valuable electronic gismos – from laptops to I pods, digital cameras and flat screen TV’s. The other reason is that burglars are targeting well-off neighbourhoods more and more.

Against this background the insurance companies are able to price home and contents insurance down to individual postcodes. If their records show a problem with flooding, or subsidence, or an increasing incidence of burglary in you immediate area, their computers will load your premium to reflect the additional risk.

Your no-claims discount will only serve to offset these upward pressures to a certain extent. And don’t forget that once you have a five years no-claims record, your discount doesn’t increase, it’s capped. Thereafter, all the premium increases will land fully in your lap.

So what can you do to save money?

The most important step by far, is to shop around every year for the best available deal. Maybe it’s a chore, but thirty or forty minutes on the Internet (including ten minutes on this web site!) will yield you results. Within that space of time you’ll have found the cheapest insurer and, as an online customer, you’ll probably have qualified for an additional 10% discount. Then you can always agree to pay by direct debit – that’ll also trim off a bit more.

Of course there are other things you can do, especially in the arena of home security. Join the local neighbourhood watch scheme, install security locks on your windows, fit external security lighting, up-grade the locks on your doors and get a burglar alarm. Added security will earn you discounts on your insurance but will cost you money to install! Perhaps the added peace of mind alone will be worth the cost. Only the local neighbourhood watch scheme arrives free!

The best general rule is don’t stick with the same insurance company too long. Keep them on their toes. They have a tendency to take loyal customers for granted. Yes, it really does pay to shop around – try it and prove it to yourself!

There are many home insurance providers, and each of them will present you with a policy proposal outlining the kind of coverage you will get and the corresponding fees. However, before you sign on the dotted line, it’s important to really understand what you’re paying for—and whether or not you’re fully protected against the risks that you’re most concerned about. Here are some things to look at.

The typical home insurance plan is divided into two parts: property protection, and liability protection. This will be further categorized into the dwelling, other structures, personal property and loss of use.

The dwelling is the house proper, and all of its fixtures and structures. This includes heating, electrical wiring, plumbing, even the built-in appliances. Other structures are not connected to the house proper but are still within the property boundaries, such as garages, sheds, driveways, and walls and fences. However, a personal home insurance policy will not cover additions you made for business reasons, such as a store or even a room you converted into a home office.

Personal property basically refers to your belongings, the contents of your home that may be of value to you. This can be actual objects like artwork or antiques, jewelry or currency, and even electronic data that has a certain value. However, you should check what kind of items are covered in your basic personal property coverage. In some cases, very valuable items such as antique coins or personal heirlooms, or very expensive jewelry, exceed the limits in an average homeowners policy. Depending on the kind of assets you plan to keep in your house, you should make the proper adjustments—although in general, it is best to keep these items in a bank’s safety deposit vault.

Loss of use is when you are unable to use your home, and incur living expenses while looking for alternative housing.

Some policies will give additional coverage, though this can affect your overall cost. For example, you may want the policy to cover the cost of removing any debris if there is damage to the property because of a storm (important if you live in a country or state where you are at constant risk from weather hazards). Other policies will also guarantee the cost of replacing any structure that was destroyed. Theft coverage will protect you in case of burglary, and can be extended to include whatever objects you had in your car or trailer at the time of the incident. Personal property protection can even minimize your risk form credit card fraud, in case your credit card was one of the items stolen.

Policy owners may also ask for an Inflation Guard, which will adjust the amount of insurance you receive every year to be able to keep up with the changes in real estate values caused by inflation. This means that even 10, or 15 years down the road, you will receive the adequate coverage to actually replace your home in case of a severe accident.