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June 5, 2009

Home and Contents Insurance – How to Find the Best Deal

Filed under: insurance — Tags: — admin @ 2:02 pm

Each year building insurance increases and the average increase last year was about 1%; seeing the price now sitting at around £205 per year.  Likewise, the cost of contents insurance increased by around 2%, now costing the ordinary homeowner about £151 per year. That is the average, but there are some companies that have pumped up the prices considerably more – last year Norwich Union for example, increased rates by a massive 6%.

So you might be wondering – why this is the case when competition is on the rise?  The answer is fairly simple – external forces that contribute to price increases are on the rise as well – and that’s what we’ll discuss now.

# 1 – Increased costs of house repairs and building

Inflation has seen the cost of labour and building materials increase, meaning the repair or rebuilding of a house is more expensive. Add to this the impact of inflation upon the operating costs of the insurance company. Insurers must allow for increased employee wages, running costs, rent and so on – resulting in the cost of insurance increasing steadily over time.

# 2 – Changes and impact of the weather

While some people debate the causes of changing British weather, insurers are busy calculating the impact of more tempestuous weather in terms of premium hikes. Whatever the cause, the fact of the matter is, extreme weather is on the increase. The 1987 hurricane was a freak occurrence, but regular instances of flash flooding in Boscastle, Cornwall, Helmsley in North Yorkshire, and Carlisle have made headlines around the world. The result of this is that the Association of British Insurers estimates the average insurance claim for flood damage can vary from £15,000 to £30,000. An increase in these kinds of claims costs millions, which the insurance companies must inevitably factor into premiums to spread the risk.

# 3 – Increased instances of burglary

With claims lodged for burglary also increasing and a change in the items available for burglars to target – the average burglary claim is now £1,400. The 2 major causes of this change are:

• Theft of digital cameras, laptops, game consoles & ipods. Today burglars can readily find these easily transportable and valuable electronic gadgets in homes. These items are easy to steal and retain a high resale value. Little wonder that burglars go after these objects, leaving the insurance industry to respond by increasing premiums.

• Targeting neighbourhoods where there is greater affluence. Increases in the instance of house intrusion in affluent neighbourhoods means that burglars get away with more expensive items. The theft of expensive jewelery items as well as the popular electronic gadgets is also resulting in an increase in this type of claim.

Often, the insurance company will collate statistics based upon postcodes to calculate home contents premiums. If your area has a high level of affluence or is located in a flood zone, then inevitably your premiums are going to be higher. Likewise, if you are in an area with a high number of reported home break-ins – then you will be seen as being at risk of burglary too.

The no-claims discount that some companies offer can go some way to balancing the price hikes, but you will also discover that many companies now cap these discounts at 5 years with no claims, so there is a limited period after which there are no further options for increased discounts.

So how do you possibly dodge the ever increasing expense of home and contents insurance?

First things first – be on the lookout for the ideal option for your needs. Searching online is one of the best ways to secure the best deals. You’ll find that many insurance companies have an internet discount available, usually around 10%, simply for purchasing online. Another option may be to get a discount by paying via direct debit. Accepting your insurer’s routine renewal price may be the easy option, but it pays to shop around. While you may have thought that your loyalty would be rewarded, in fact it seems that only new customers get the best deals and by staying with your insurer you are almost penalised!

You can get some peace of mind and also reduce your home and contents premiums with the addition of extra security feature to your home. Participating in the local neighbourhood watch scheme, improving external lighting, installing an alarm system, adding security locks on windows, and putting in industry-recognised locks on doors can all help in the long term reduction of your policy premiums. The upfront cost can be balanced out by the long term benefits of savings on insurance costs.

If you take the time to shop around each year and are willing to move insurers, you will find that you can get a better price. Better deals are available – so don’t let the insurance company beat you with price hikes – save your money by seeing what the competition have on offer!

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