Protecting your home is a top priority. But with costs squeezed, it’s more important than ever to keep your premiums to a minimum. Below, we look at the key risks driving up home insurance costs, and what you can do to mitigate them.
Rebuilding costs continue to rise
The last couple of years have seen unprecedented levels of inflation, driven by a series of economic and geopolitical shocks – notably Covid-19, and the war in Ukraine. Rebuild values have increased around 15-20% per annum in recent years, due to a rise in construction materials, labour shortages and supply chain disruptions.
For homeowners, the good news is that increases are now slowing down. But to ensure your rebuild value is correct, it may be wise to get an up to date rebuild report. Some insurers will offer this for free if your rebuild value is above £2m, and will typically appoint a third party to carry out the report. But you are able to source your own independent valuation – assuming they have the correct professional accreditations, and take into account demolition costs, professional fees for architects and surveyors, and VAT.
Particular care should be taken when carrying out a rebuild valuation for a listed property. The surveyor will need to allow for the fact listed properties take longer to rebuild and may require specialist planning consultants. In addition to this, materials are often more expensive and difficult to source than modern materials. Workmanship will also need to be taken in to account. Many owners of listed properties do not realise they are under a legal obligation to put the property back exactly how it was following a claim. It is a criminal offence to carry out works to a listed building without listed building consent.
Climate change
Flood risk exposures are now becoming more likely. Insurers forked out £573 million for weather damage in 2023 (opens a new window), the highest in the seven years during which data has been tracked. London is particularly affected – the capital’s clay soil foundations are a major subsidence risk, exacerbated by a high proportion of below-ground extensions.
On the basis of their flood data, many underwriters are excluding flood cover either to basements, or in its entirety. However, there are a growing number of insurers who are using the UK Government’s flood reinsurance scheme (FloodRe), which guarantees cover for flood events on a more standardised basis, with premiums banded according to post code.
With a wide market to choose from, it’s crucial to ensure flood cover is included within your policy. We strongly recommend against removing it.
Underinsurance
Many homeowners in the UK are currently underinsured. For some, this may be a conscious effort to save money on their premiums. But others may not fully understand the sum insured that they require. In either case, it could leave you out pocket.
Home insurance policies typically have an average clause built into them. If you’re underinsured, this means that your insurer will only payout a percentage of the actual claim value. The percentage is calculated by dividing you’re sum insured by the amount you should be insured for, and multiplying it by the loss. So, if you’re insured for £400,000 on a home worth £800,000 (i.e. you’re underinsured by 50%), the average clause means that a claim for £150,000 will receive a payout of £75,000.
Higher-rated safes
In recent months, many of our clients renewing their insurance have been asked to upgrade their safe, or purchase an additional safe altogether. More insurers are asking for this as a result of rising indexation rates, while some clients may simply have exceeded the allowance of their safe.
In either case, purchasing the right safe for you needs depends on the value of existing jewellery or watches, your buying habits, and your age and lifestyle. To protect you going forward, it’s always best to buy a safe above the Euro grading you require. This will easily allow for any new purchases or inherited items you acquire.
For further advice and guidance, we can recommend a national safe supplier to visit your home and carry out a detailed assessment of your needs.
Unsatisfactory insurance cover
The insurance market often gets a bad reputation. If you’re searching for insurance online, you’ve probably come across several direct, ‘cheap as chips’ insurers. These deals may look good, but they can often cut corners when it comes to claims. If something goes wrong, that only ever means one thing: a dissatisfied customer.
At Lockton, we work exclusively with a panel of trusted insurers whose cover and claims service, we know and understand. As a broker, it’s our role to advocate for you in the event of a claim. But with our insurers, we hope it won’t be necessary.
General tips to minimise your premiums
Keeping your premiums to a minimum doesn’t have to be difficult. Taking these small steps can help protect you against some of the biggest threats to your property, and your pocket:
Minimise escape of water losses – the biggest costs for insurers, escape of water losses are frequent and typically severe. Installing non-return shut-off values are now a condition of many policies, and offer an effective means of reducing such losses.
Avoid leaving your property unoccupied – if a loss isn’t caught early, the impact on your property can be catastrophic. Property management companies are available to conduct regular visits or continuous monitoring. Maintaining a log of inspections will also provide useful evidence in the event of a claim.
Ensure you have a suitable alarm – following the recently announced end to BT Redcare (opens a new window), owners should act swiftly to ensure they install a suitable replacement. Many insurers now require a fully integrated fire and burglar alarm connected to a third-party monitoring system.
Be mindful of deductible/excess increases – historically, a popular means to attempt to minimise premium costs was to increase the deductible/excess on a policy. But with few insurers offering competitive discounts for these terms, doing so could be a disadvantage. Speak to your broker to review all options before agreeing to an increased excess.
For more information
Inspired by the above? If you’d like to discuss your personal home insurance, then please contact Chyna Kenward on:
M: +44 (0) 7765 698 177
