Home insurance is one of the must-have policies we tend to turn a blind eye to when the renewal letter drops through our letter box.
Not because we don’t consider it important to have. But because most of us simply accept the premium and let it renew without thinking.
Loyalty Doesn’t Pay
Research from Citizen’s Advice suggests that home insurance companies are currently overcharging up to 13 million UK households, older people are paying most over the odds.
The figures, in a study by Citizens Advice published in November, also show that 40% of people over the age of 65 have kept the same home insurance policy for more than five years.
But Citizens Advice says that Many Providers are still not Fully Complying with the Rules.
That means they’re likely to be paying 70% more than a new customer would for the same policy.
This is a big surcharge for even the cheapest policy for building and contents insurance. The charity states that even in this case it adds up to an extra £110 a year, on average, that the policyholder would not be paying if they took out a new policy with a new provider.
Citizens Advice is critical of the fact that charging loyal customers more than new customers has become “market-wide practice”.
The research suggests that almost one-third of the entire home insurance market might be paying more than they would be if they were a new customer.
“Home insurance companies are taking advantage of people’s loyalty,” says Gillian Guy, Chief Executive of Citizens Advice.
She has urged the Financial Conduct Authority to deal with the practice of overcharging. The FCA has set out rules to protect consumers by obliging companies to openly inform customers what their premium at renewal was in the previous year.
Never, Ever, Simply Auto-Renew!
It’s even more important not to let your insurance run over in view of the fact that home insurance costs have continued to rise this year. They are up 8.5% from last year.
These figures are from Consumer Intelligence. It says the rise is due to a number of factors including inflation increasing the cost of claims and higher levels of fraud.
But it means that the hike in average premiums is already nearly three times the 3% rate of inflation. This, in turn, is pushing up the cost of repairs.
Yet, as we explain here, taking a short cut, and going without home insurance, could cost you more than you could ever have imagined.
Home insurance is not required by law, in the same way as car insurance is. But if you own your home outright, there’s a strong argument that it should be.
The consequences of not having home insurance could be huge. Have you ever considered what would happen a fire breaks out in your uninsured home and then causes damage to neighbouring properties? You would be liable for repairs to all the damaged properties.
What Home Insurance Do You Need?
The type of cover you require will depend on whether you rent or you own your home. Homeowners and landlords usually need both buildings and contents insurance. If you rent you’ll normally only need contents cover.
The best advice is to always shop around for a new home insurance policy. You might well be able to save hundreds of pounds.
But before you do, here are some tips to help you got the premium down before you even apply:
- Pay for quality locks. Get extra secure locks such as five-lever mortise deadlocks conforming to BS (British Standard) 3621 on your doors. This could massively lower your contents premium.
- Be ready to pay a bigger excess to lower your premium. Most providers will allow you to choose to pay a voluntary excess on top, which will bring the cost of your premium down. The more you pay, the lower your premium will be, but this could reduce the value of any claim.
- You should consider the cost of paying your premium by monthly instalments, as you may often be charged additional interest. You could consider paying your annual premium in full or other cheaper forms of borrowing if necessary.