How to find the right home insurance

Home insurance premiums are rising, but this type of cover may be too important to skip.

You aren’t legally required to insure your home, said Money.co.uk, but it’s a good idea to do so. Home insurance can help protect you from paying out “huge costs” in the event of “fire, flooding, subsidence or if your belongings are stolen”.

The average insurance claim for domestic property is around £4,000, according to the Association of British Insurers (ABI). To some people, that may not seem like much. And you might even have enough savings to replace valuables like a stolen laptop or jewellery, said CompareTheMarket. But the truth is, “the decision to forgo home insurance could leave you financially exposed”, the comparison site added, recommending you ask yourself: “Could you really afford to rebuild your home if there was a fire or flood?”

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Home insurance explained

Home insurance is cover you take out to “financially protect” your home and personal possessions against unexpected events like loss, damage and theft, explained MoneySuperMarket.

There are two types: buildings insurance and contents insurance. The former covers the “overall structure of your home”, the comparison website said, while the latter may pay out if your personal possessions are stolen or damaged at home.

In some instances, you may not need both. For example, if you’re a tenant, your landlord may pay for the buildings insurance on your rental property. But “it’s up to you” to find contents insurance to cover your possessions, said MoneyHelper.

Additionally, if you live in a flat, you may need only contents insurance as the building will be insured by the property manager. Buildings insurance is usually required by mortgage lenders when you purchase a property but that doesn’t mean you have to get contents insurance.

If you do need both, the financial website said, it’s “usually cheapest��� and “easier and quicker” to buy them together on a combined policy rather than taking out two separate ones.

Why do you need home insurance?

For most people, their home is “by far the most valuable thing they own”, said The HomeOwners Alliance, so if your house caught fire and it isn’t insured, “you could watch everything you own go up in smoke, literally.”

If your home burned down and you didn’t have building insurance, you might not be able to afford to rebuild it and would still have to repay your mortgage, the website explained, “despite not having anywhere to live”.

Contents insurance is “worth having” if you wouldn’t be able to afford to replace your possessions if they were lost or damaged in a fire or stolen by a burglar, said Money.co.uk. A landlord may also require a tenant to have contents insurance as part of their tenancy agreement.

What’s covered?

It is important to “look at the small print” to check what your insurance covers, said The HomeOwners Alliance. Polices vary, but most cover damage from “fire, wind, hail, explosion, vehicles or aircraft crashing into your home, smoke, and damage caused by criminal activity”.

You can’t call on your home insurance “every time you’re faced with a repair bill on your home”, said CompareTheMarket. Things like storm damage to gates and fences or general wear and tear usually aren't covered. But you may be able to get add-ons, such as accidental damage insurance, which might cover something like spilling liquid on your laptop, for example. But add-ons “can significantly push up the price of your premium”, the comparison website said, so make sure you really need them.

How much does home insurance cost?

Home insurance premiums have been rising, but “by less than the rate of inflation”, according to the ABI. That still means premiums are going up. The average price paid for home insurance in the first quarter of 2023 was £315, up 6% over the past year, the trade body said.

The rising costs were attributed to turbulent weather and higher prices of materials for repairs.

Riskier properties – such as those in a “high-risk area” for extreme weather or that are “an easy target for burglary” – tend to attract higher premiums, explained Unbiased.

An insurer will work out a premium based on the area, your claims history, and your lifestyle, such as whether or not you are a smoker, have children, or are rarely at home, the website added. The cost will also depend on the level of cover you need and any add-ons.

Taking out too much cover means you could be overpaying, added Confused.com, but “too little cover” may mean some key features aren’t protected. When figuring out how much buildings insurance to buy, you need to calculate how much it would cost to rebuild your home from scratch. This isn’t always straightforward, but using the Building Cost Information Service calculator can make it easier.

Contents insurance is simpler, as you just work out the cost of replacing your valuable personal items.

How to cut your insurance costs and find the best deal

Making your home safer – by installing security devices like burglar and smoke alarms and high-quality window and door locks, for example – can reduce your premiums, said the ABI.

These safety features offer other financial benefits, said Money.co.uk, as keeping your home secure will reduce the likelihood that you need to make a claim, “which will help you build a no-claims bonus”.

It may also be worth changing how often you pay for insurance. Monthly rather than annual premiums can cost 6% more, according to MoneyHelper.

Increasing the excess you are willing to pay if you make a claim can also reduce your premium, added Confused.com, but “make sure you’re comfortable with paying the amount you set” if there is an incident.

Be sure to opt out of auto-renewals. It is vital to shop around, said The HomeOwners Alliance, as insurers “make a fortune out of apathy” and could hike your premiums without you even noticing.

Marc Shoffman is an award-winning freelance journalist, specialising in business, property and personal finance. He has a master’s degree in financial journalism from City University and has previously written for FTAdviser, ThisIsMoney, The Mail on Sunday and MoneyWeek.

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