How much is home insurance?

Home insurance protects you should something unforeseen happen to damage your home or its contents. But how much does home insurance cost?

Find out how to calculate the cost for your property.

House Insurance cost

According to independent financial researcher Consumer Intelligence, the average home insurance cost of a combined home and contents policy in 2019 was £139 per year

But what is house or home insurance, do we need it and how do we work out how much our insurance premiums will be?

What is home insurance?

Home insurance is essentially the cover that you take out to protect your property, should something unforeseen happen. Home insurance policies are policies of indemnity: this means their aim is to put the policyholder back in the position they were in just before the loss or damage occurred. 

You agree to pay an insurance provider a monthly or annual premium, and should something happen to your home, you can put in a claim to your insurer to replace what’s been damaged or lost.

We can separate home insurance into 2 main parts: the building itself, which is covered by buildings insurance, and what is inside it, covered by contents insurance.

What is buildings insurance?

Buildings insurance covers the cost of repairing any damage to your property, as well as the walls, roof, windows and any sheds, garages, or fences. If you have problems with drains, pipes or cables, your buildings insurance should cover the cost of replacing these, too. 

Permanent fixtures and fittings such as fitted kitchens, baths, and wood or laminate floors are also covered by your buildings insurance.

But the biggest requirement of buildings insurance is to cover the cost of rebuilding the structure of your property, should something catastrophic happen. 

If you’re wondering what sort of events your buildings insurance policy covers you for, they include:

  • Fire, explosions, storms, floods or earthquakes

  • Frozen or burst pipes

  • Fallen trees, aerials, satellite dishes or lampposts

  • Subsidence

  • Vehicle or aircraft collisions

  • Theft or vandalism

What is contents insurance?

Broadly speaking, if you could pick up your home and shake it upside down, contents insurance would cover everything that fell out. 

Should your property suffer a fire, theft or flood, your furniture, television, kitchen appliances, white goods, computers, electrical equipment and personal belongings would all be covered by contents insurance. Whatever is in your garage, shed or other outbuildings would also be covered.

And while carpets, curtains, light fittings and blinds might be considered permanent fixtures, they, too, are (surprisingly) covered by contents insurance. For many people, the average home contents value is around £50,000.

Combined buildings and contents insurance

If you need both types of insurance, it is possible to take out separate policies from different providers. However, if you want to simplify your buildings and contents insurance costs, you can take out a combined buildings and contents insurance policy, which will often work out cheaper.

Do I need home insurance?

While having buildings and contents insurance are not legal requirements, if you own your property you should take out both. 

Indeed, with the Land Registry revealing in August 2020 that the average house price in the UK is now £239,196, it is unsurprising that most mortgage lenders insist that borrowers take out buildings insurance as a condition of their mortgage.

If you rent your home or are a Council tenant, you do not need buildings insurance as you are not responsible for the building, but are likely to find contents insurance an important policy to have.

Contents insurance calculator

When the time comes to take out home insurance you will have to ask yourself ‘how much contents insurance do I need?’

This is, of course, a tricky question and one that many fall foul of. It is extremely easy to guess what the average house contents value is, when filling in an insurance application. However, as many of us underestimate the value of our belongings, this could leave us out of pocket, should we need to claim.

Thankfully, we can use a contents insurance calculator, which walks us around the home, filling in the values of items in each room, one by one. At the end, it adds up all of the values and presents a grand total that we can apply for cover for.

Buildings insurance calculator

Now you have worked out how much contents cover you will need, it is time to do the same for your buildings insurance. 

It is important to understand the distinction between rebuild cost and property value, to ensure you do not over insure your property.

Unlike the market valuation of your property (such as a valuation provided by an estate agent) the rebuild cost is the amount it would cost to rebuild your home if it was completely destroyed, including all labour and materials.

Depending on where you live, your home’s rebuild cost is usually lower than its market value, so using the correct value when applying for cover will ensure you do not overpay for your buildings insurance.

But this is where, unless you are a builder, things get a little more complicated. After all, how much would it cost you to rebuild your home?

Fortunately, if you have a standard, brick-built property you can use a buildings insurance calculator to work out the rebuild cost. 

Factors that insurers take into account include:

  • Property age and address

  • Number of bedrooms

  • Wall and roof materials

  • Floor materials

  • Doors and windows

  • Utilities

  • Outbuildings (garage or shed etc)

If your home is a listed building, is made of non standard materials (such as timber or thatched roof) or has unique architectural features, you should contact a chartered surveyor for an assessment. 

Experts recommend that we should reassess the rebuild cost of our properties every 5 years. You should also be aware that if you improve your home, such as by adding an extension or loft conversion, this will increase your rebuild costs.

You can use this buildings insurance cost calculator to work out your home’s rebuild cost.

Buildings and contents insurance costs are clearly essential to protect us if the worst should happen. Just imagine coming home to find your roof has been damaged by a storm, your house has suffered from subsidence or you've been burgled, and realising that on top of the distress caused, you will have to find thousands of pounds for repairs too?

What affects the cost of home insurance?

The cost of home insurance has been steadily creeping up over recent years. According to Consumer Intelligence, we saw the buildings and contents insurance average cost for 2019 rise by 2.7%.

But interestingly, while this trend has continued into 2020, with the average price of home insurance rising by 3% in the 12 month period to September 2020, premiums have actually fallen in the last three months, which could be attributed to the coronavirus (COVID 19) pandemic.

Consumer Intelligence Products Manager John Blevins believes ‘It’s perhaps no coincidence that this period takes us through recent lockdown where the vast majority of people were spending more time at home’.

‘Crime rates and home claims have both declined in recent months, which is the most likely reason for this small deflation in premiums’.

There are other factors that can affect your home insurance cost. Putting in an insurance claim tends to increase the price of your premiums for the following years. Living in an area prone to flooding or using your home for your business can also drive up your premiums. 

How can I reduce my house and contents insurance costs?

You may feel that the price you are paying is far more than the average home and contents insurance cost, but fortunately, there are ways that we can help reduce the cost of our home insurance policies.

Shop around

First and foremost, avoid simply accepting the first quote you are given. 

By shopping around and using comparison sites such as Bankrate, you can search for quotes from numerous providers to find the best value cover for you. You may even find you get offered the same level of cover from your current provider, but at a cheaper cost. Remember that not all providers feature on every comparison site, so it is worth searching for quotes with a few. 

Cut out unnecessary extras

Standard contents insurance policies cover whatever is in your home. However, it is possible to increase your protection by adding various extras. 

Personal possessions cover, which insures valuables when they are outside the home, accidental damage cover, home emergency cover or family legal protection are just a few of the examples of optional extras you can add, which you may already have elsewhere, or simply not need. By cutting out any unnecessary extras you can significantly reduce the price of your home insurance premium.

Look at your voluntary excess

Insurers tend to set a compulsory excess on buildings and contents policies, but also offer a voluntary excess. If the voluntary excess is set to zero, your policy will be at its maximum cost, but this will reduce with every £50 you increase the excess by. For this reason, it can be worth adding a voluntary excess as it can significantly reduce your premiums. 

However, be careful not to set too high a voluntary excess, as you will need to be able to afford it, should you need to claim.

Pay annually, not monthly

Most insurers will allow you to pay either monthly or annually. But take a closer look at the monthly payments and you could find your insurer is charging a significant amount of interest, for the convenience. Always pay annually, if you can.

Never auto renew

Insurers will write to you before your policy ends to tell you how much your premium will be for the following year. However, they almost always increase the cost and to add insult to injury, will often store your payment details so they can simply take the money and auto renew your policy.

By making a note in your calendar 3 weeks before your policy expires you will have time to search for cheaper cover. Remember to call your current insurer (or log in to your account) to inform them that you do not wish to auto renew or you may be charged regardless.

Combined cover may be cheaper – or not

When working out how much is buildings and contents insurance for your property, you may find that using one insurer for both gives the cheapest (and most convenient) premium.

However, don’t simply assume this is the case. 

If you have a lot of expensive items to insure you could find that using a specialist insurer for contents, and another for buildings cover works out cheaper. 

If, on the other hand, you live in a listed building but have hardly any contents to cover, an insurer that specialises in this type of property may give you the cheapest buildings cover whilst you can get a much better deal for your contents insurance elsewhere.

Be patient when searching and try a few options to see which works out best for you. 

Improve security

Installing high quality locks on doors and windows and fitting a burglar alarm or camera will improve the security of your property and can help reduce your insurance premiums.

28 October 2020