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Your home insurance price explained

Renewing your policy

Before your policy comes to an end, we’ll send you a renewal invitation. It will show two prices – last year’s and the price for continuing cover for another year.

Your price might be quite different this year because of recent changes in regulation, which affect all insurance providers. As you already have a policy with us, when you renew it, your price will be the same or lower than that of a new policy.

How we calculate the cost of your cover

There are many factors that influence the price we give you for your cover – some unique to you, others a result of the world around you – as well as the likelihood of you needing to make a claim.

We pay claims out of a central pot, so if lots of people claim at once, that pot has to go further and prices need to go up. But we constantly review the way we calculate the cost of home insurance so we can make sure you get the best price.

Home insurance claims

Claims make up a huge part of the average home insurance cost. Here’s how that breaks down

 Infographic shows how claims breaks down which makes up a huge part of the average home insurance cost.

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What directly affects your home insurance cost?

There are numerous factors we need to consider about you, your home and where you live.

Number of bathrooms

Escape of water is one of the most common reasons people make a claim. More bathrooms mean more pipework, which means a greater chance of something going wrong. It’s also more difficult and costly to trace the origin of the leak.

Where you live

We rate each postcode and address individually, which reflects the price you pay. We look at things like the average claims costs together with future claims we expect to see in your area. More claims in your area means home insurance prices are likely to be higher.

Type of building

We assess each type of home differently, for many reasons. Terraced houses, for example, suffer less subsidence, so may cost less to insure than a semi-detached in an area where there’s a high risk of subsidence – regardless of its size or value.

How secure your home is

Having an alarm fitted doesn’t always equate to a lower price. Sometimes, depending on the crime levels in your area, or if you want to insure your home for a large sum, we may ask you about your alarms and locks, but you might not get any further reductions in price.

Building materials

The way your home was built will probably affect your price. This is mainly down to the potential fire risk – a wooden-framed or thatched-roofed house will cost more to insure.

How busy your home is

Someone’s there during the day
This could put you at a lower risk of theft, but it increases the chance of other claims, such as fire, plumbing problems or accidental loss or damage, which could increase your price.

How many people live there
This has a big impact on prices. More people means more belongings and more potential claims.

Your previous claims

Your claims history in the last five years, including accidents, claims, or losses, all affect your price.

What else affects the cost of home insurance?

Not everything is under your control – there are plenty of external factors we need to think about, too.

Severe weather

Extended periods of extreme weather cause numerous problems in the UK, most often resulting in burst pipes. But it’s flooding claims that have really risen over the past few decades. As with all insurers, we regularly review the likelihood of future claims due to flooding. The government has worked with the entire insurance industry to make sure you can get affordable home insurance if you live in a flood area. This resulted in an initiative called Flood Re – and we’re very much part of this.

Change in the nature of claims in the market

If we see a change in the types of claims we receive, our prices will also change. If certain types were to go up or down in frequency, it’s likely that the cost of home insurance would too. For example, there’s been a significant increase recently in claims around escape of water with all insurers. This makes up a large part of premiums because we estimate how much we’re likely to pay in future claims and include this in our prices.

Tax increases

Every price includes a contribution towards administrative costs, such as staff and buildings, as well as Insurance Premium Tax (IPT). Over the past few years, the government has increased IPT several times, so we have to put our prices up accordingly.

Number of claims

We settle thousands of claims each month. If the number of claims we receive increases, for example because of extreme weather events such as floods, this could increase our costs and lead to higher prices.

Increased repair costs

From TVs to tablets, state-of-the-art kitchens to lighting, belongings are becoming increasingly expensive. Naturally, it’s also becoming more expensive to fix them, which pushes up the cost of providing insurance and, ultimately, the price you pay.

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Manage your policy

Make a claim, make changes, see your policy documents.