Most home insurance providers save their best offers for new customers. This means that loyal policyholders often lose out and pay more in their second year of cover.
But how does home insurance renewal work? And how can you make sure you save money on your cover?
What is auto-renewal?
Like car insurers, many home insurers have auto-renewal clauses in their policies. This means that, unless you make it clear that you don’t want to renew, your cover will roll over automatically at the end of the policy.
Your home insurer will provide you with a notice of renewal before you're signed up for another year. This is usually sent by post, outlining the full details of your new policy and the premium you will pay.
The document will also explain how you can cancel and how long you have to change your mind. Most companies will contact you at least 21 days before your policy is automatically renewed.
Will I be charged a renewal fee?
Renewal fees in the home insurance market are pretty rare, but some companies will charge them. Hastings, for instance, charges £5. Be sure to read your policy document carefully to make sure you are not stung.
What is a pre-renewal deposit?
Some home insurance providers – notably Swinton – automatically take a deposit from you ahead of renewal in attempt to secure your business for another year.
The payment, usually one month’s premium, only applies to pay-monthly customers and is taken from your account a month before renewal. The amount is deducted from next year’s premium if you decide to stay on.
If you know your home insurance policy is coming up for renewal, check with your provider for pre-renewal deposits to avoid being caught off-guard.
Can I cancel if my policy accidentally rolls over?
You can cancel your home insurance policy, but it will probably come at a cost. You'll have a 14-day cooling-off period once your policy has started, and most insurers will let you cancel during this period, only charging you for the cover you have used.
Some providers,however, will still charge a fee if you cancel in the first 14 days.
For instance, Kwik Fit will charge you £30 if you cancel within the first 14 days, while Sheila’s Wheels levies a £20 fee.
The charges can be higher if you are outside of the cooling-off period, so make sure if you want to switch that you cancel your cover before it is renewed.
When should I start looking for a new home insurance policy?
Eleven months into your policy is a good time to start looking for new home insurance cover. Follow our full tips to finding cheap home insurance.
Once you have found a good price, you could either take out a new policy or use it as leverage to haggle down the premium quoted by your current provider.
If you don’t think you’ll remember to take action before renewal, RBS offers a home insurance policy where the premiums are fixed for three years so is worth considering if the initial premium is competitive.
Buying a fixed home insurance policy does not lock you in for the full three years, so you can still switch if you can find a better deal.
However, the cost of cover will still increase if you make a claim or if there is an increase in insurance premium tax, so make sure, if this happens, you explore all possible alternatives at renewal.