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20 May 2022

Home insurance premiums hit record low: how to get the best deal

Follow our tips to save on your buildings and contents insurance  

Home insurance premiums have fallen to the lowest levels on record, with both buildings and contents insurance policies dropping in cost in the first quarter of the year. 

That's according to a new report by the Association of British Insurers (ABI), which says cheaper premiums will provide a boost to households at a time when the cost of living is soaring.

Here, we explain what's happened to home insurance premiums and offer advice on how to save when renewing.

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Home insurance premiums drop to lowest levels on record

The average cost of home insurance has fallen by 7% in the last year, according to the ABI's latest quarterly tracker. 

This means both buildings and contents insurance premiums have dropped to the lowest levels since it started collecting data in 2012.

Laura Hughes of the ABI says: 'Many households will be reassured that the cost of protecting their home and their possessions has remained competitive, despite the increasing costs of construction materials and labour. 

'The storms in February, which will lead to insurers paying out an estimated £500 million to affected customers, are a dramatic reminder of the vital financial protection home insurance provides against unexpected and costly events.'

The table below shows how the average cost of home insurance has changed in the last year.

Type of insuranceAverage premium in Q1 2022 (£)Yearly price change (%)
Buildings insurance£225-7%
Contents insurance£114-11%
Combined policies£307-2%

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Are prices falling due to the loyalty penalty ban?

In January, new rules came into force to stop insurers from quoting existing customers a higher price than they would a new customer.

The practice, known as 'price walking', was outlawed to make insurance pricing fairer and more transparent for consumers. 

While the changes should mean loyal customers won't pay over the odds, they could have a knock-on effect for those who switch each year to get the best new customer deals. 

The ABI says it is too early to assess the impact of the rules, but says some policyholders could still benefit from shopping around for the right policy. 

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Why do some trackers say prices are rising?

As with car insurance, the ABI's figures differ to those reported by price comparison websites, which continue to state that prices are rising. 

A report released earlier this month by Compare the Market claimed average premiums increased by £6 year-on-year in the first quarter of 2022, to reach £156. 

These contrasting figures are explained by the different methodologies used. Comparison websites use customer quotes to generate their pricing data, while the ABI uses the actual price paid by policyholders.

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Do I need to get home insurance if I'm renting?

Compare the Market says nearly half of renters (48%) don't have contents insurance, meaning they could face significant costs if their valuables are lost, stolen or damaged.

Renters don't need contents insurance by law, but if you're renting an unfurnished property you should take out adequate cover to protect your belongings, as these won't be covered under your landlord's insurance.

Contents insurance doesn't need to be hugely expensive or overly comprehensive. If you're living in a flat-share, for example, you might be able to get coverage just for items in your bedroom, as long as there is a lock on the door. Insuring contents throughout the property could be prudent, with the caveat that your premium might be affected if your flatmate makes a claim.

As a renter, you don't need to take our buildings insurance - this is your landlord's responsibility. 

How to find the best home insurance deal: five tips

1. Don't over-insure

Some policyholders overpay on their insurance due to incorrectly calculating the value of their property and contents. 

For example, buildings insurance only needs to cover the cost of rebuilding the property, not its current market value. Consider using a valuation calculator to avoid over-insuring.

You should also analyse whether you really need the optional add-ons offered by insurers.

2. Shop around for a better deal

Your insurer should contact you with your renewal price around a month before your policy is due to expire. 

This is a good time to shop around for a better deal. Comparison websites are a great place to start, as they allow you to compare policies from dozens of providers in one go.

It's also worth getting quotes from providers which don't appear on comparison sites, such as Direct Line and NFU Mutual.

3. Pay annually if you can

When you take out a home insurance policy, you'll have the option of paying annually or monthly.

Paying monthly allows you to spread the cost, but this comes at a price. Paying monthly essentially involves taking a loan from the insurer, often with a high rate of interest.

With this in mind, pay annually if you can - or if you want to spread the cost, consider using a 0% purchase credit card

4. Improve your home security

Most insurers require your property to have a minimum level of security before they'll agree to insure it. 

This includes things such as having deadlocks on external doors and locks on windows.

Security improvements could cut the cost of your premium. For example, you might consider upgrading to five-lever mortice deadlocks, or install a burglar alarm for additional protection.

5. Make sure you're with a good provider

Getting the right insurance policy isn't all about cost - you'll also need to know that you can rely on your provider should you need to make a claim.

Our home insurance reviews rate the UK's biggest providers on the quality of their customer service and the breadth of coverage included in their policies.

Check out our guide to the best and worst home insurers to find out the brands that achieved Which? Recommended Provider status. 

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