Loyal customers pay up to 75% more by staying with their home insurer

Renewing your home insurance can cost you significantly more, with loyal customers paying up to three quarters more than new customers, Which? analysis finds.

Prices for combined buildings and contents insurance policies generally increased the longer customers stayed with the same provider.

Which? reveals how much more you could be paying if you renewed your home insurance, and what to look out for when shopping around for a cheaper policy.

This research was first published in Which? Money magazine. Take a one-month trial today for just £1.

Loyal customers pay higher premiums

While renewing your home insurance can be a convenient option, not shopping around when a policy is about to end can be a costly choice.

In November 2018, Which? surveyed 5,146 members of the general public who had a home insurance policy, asking how long they had been with their insurer and how much they paid.

From those who told us how much they were paying, we discovered that new customers were being charged an average premium of £200.

But premiums rose by 20% for customers who had been with their insurer for one to two years, who paid on average £240. At its most extreme, people who had stayed with their insurer for 15 to 20 years were paying 75% more than new customers.

The graph below shows how much prices can increase the longer you stay with the same insurer.

Why loyal customers are paying more

In October 2018 the Financial Conduct Authority found that home insurers aim to acquire new customers by selling discounted policies, but then aim to recover these losses by raising prices over the next few years.

Although switching your home insurance provider can save you money, our survey revealed that half of customers renewed their policy.

Those over 65 were more likely to renew their home insurance compared with younger customers, putting them at higher risk of paying a loyalty penalty.

Of those we surveyed, 61% of customers over 65 said they renewed their current policy, compared with 55% of those aged 45 to 64, and 41% of customers under 45.

How to shop around for cheaper home insurance

When your policy is coming to an end, check whether renewing it will leave you paying over the odds.

Even if you don't want to leave your current provider, getting quotes from price-comparison sites will put you in a position to try and haggle for a better deal.

We heard from some customers in our survey that their insurer was open to haggling on renewal.But if your insurer won't budge on price, it could be time to switch.

Here are some of our top tips on how to find the best home insurance.

1. It's usually cheaper to pay annually

It's often cheaper to pay for home insurance in one go, rather than spreading the cost with monthly instalments.

If you pay monthly, you're effectively taking out a loan from your insurer. As with most loans you'll usually pay interest.

When we analysed 60 buildings and contents insurance policies from 37 insurers, we found policies where paying monthly could add an extra 15% to 36% to your home insurance bill, depending on the insurer.

2. Check what your contents insurance covers

If you're buying contents insurance, check to see what's covered automatically, and what contents are covered as an 'optional extra' that you have to pay more for.

For example, most contents policies we looked at don't cover your mobile phone as standard when it's away from home, so you'd have to buy an add-on, such as 'personal possessions' cover.

You also usually have to pay extra to insure a bike when it's away from home.

3. Look out for cover limits on valuables

No matter what your overall level of cover is for contents, typically there are limits on how much each of your individual valuables are insured for.

Of the contents policies we looked at, this ranged from £1,000 to £20,000 for each valuable, depending on the policy.

If you want to insure anything that's worth more than the individual limit set by an insurer, you can usually add these as a 'specified item' on your policy, at an extra cost.

An insurer might also place a limit on the total amount you can claim overall for valuables.

4. Compare home insurance policies

Make sure you're getting the level of cover you want for your home and contents. While one policy might be cheaper than another, any differences in price could be because the level of cover is lower.

For example, three quarters of policies we looked at only cover a home emergency if you bought an optional add-on - and two policies didn't cover it at all. Home emergencies can include incidents such as burst pipes, leaking radiators and damaged windows.

Cover for accidental damage is another common optional add-on. Only a quarter of policies we looked at fully cover accidental damage automatically. Some policies do include limited accidental damage cover as standard for things such as TVs, radios and solar panels.

You can find more advice on shopping around in our guide to finding cheap home insurance.

And if you're a Which? member, you can read our home insurance company reviews, where we've listed what is standard and optional, as well as cover limits, for 60 different features of a standard home insurance policy.