As a nation we’re wasting an eye-watering £937million
a year by automatically renewing our home insurance. Insurance companies rely on our apathy to make money from us, often providing uncompetitive premiums to existing policyholders while reserving their best deals for new customers.
So, if you accept your renewal quote without shopping around, you might as well be throwing money down the drain.
Shop around and save
Research by moneysupermarket.com found you can slash an average of £132 off your home insurance premium by comparing prices but, despite this substantial saving, more than a quarter of homeowners automatically renew their policies each year.
Of those who do automatically renew, 15% don't think they can find a better deal and a further 14% are missing out on savings as they can't be bothered to investigate other deals.
Another key reason why many people don’t change their household insurance is because they have taken out cover with their mortgage provider and wrongly believe they can’t move elsewhere. Your home insurance and mortgage are two completely separate agreements and your mortgage provider cannot dictate where you get your home insurance from.
Choose comprehensive cover
Remember that the cheapest cover may not necessarily be the best, so always read the small print to ensure any policy you are considering switching to provides you with sufficient protection.
Julie Owens, moneysupermarket.com’s head of home insurance, said: “Comprehensive policies will cover your home against problems such as subsidence, burst pipes, personal liability and even boiler breakdown in some cases, all of which could land you with a bill for thousands of pounds.
“This is in addition to more common incidents, such as theft, burglary or loss of possessions away from the home. Without having cover in place you could end up having to foot a very expensive bill."
It is important to understand that household insurance is not a maintenance contract. Insurance will cover damage caused by certain bad weather conditions, such as storm, flood or escape of water from a frozen pipe, but your property must be kept in a good state of repair for claims to be met.
Don’t under insure
Many people underestimate the value of their home contents, so it is well worth regularly totting up how much you think your possessions might be worth. Most insurers offer an automatic minimum of around £35,000 or £40,000 so check to see if this will meet your needs.
Remember that larger items may need to be listed individually on your contents policy, as insurers often impose a single item limit of £1,000 or £2,000.
Being under-insured can have serious repercussions. If, for example, your home contents are worth £45,000, but you are insured for £30,000, your insurer will consider you to be under-insured and therefore could only pay half of any subsequent claim, even if it is less than the £30,000 sum insured.
Having contents insurance that extends to cover your garden is also important. According to research by insurer esure, over £3.7 billion a year is spent on plants and garden furniture, providing rich pickings for burglars.
Popular items targeted by thieves include expensive potted plants, lawnmowers and electrical power tools, garden furniture, children’s play equipment, bikes, barbecues, and outdoor gas heaters, so if you have a burglar alarm, think about extending it to your shed or other outbuildings.
Remember that if you have home contents insurance and your windows and doors do not meet your insurer’s security requirements, then any claim can be refused. Generally, minimum security requirements include mortice deadlocks on the front door, and window locks on all windows.
For more on this, watch our video ‘Thousands of pounds at risk in your garden’.
Reduce home insurance costs
You can reduce your household insurance bills by paying annually instead of monthly. This will usually result in a saving of around 10%.
However, there are insurers which don’t charge extra if you pay monthly. These include M&S, Lloyds TSB, Halifax, Bank of Scotland and Sainsbury’s. Other ways you can keep the cost of premiums down include increasing your excess, which is the portion of any insurance claim you must pay yourself.
Fitting a burglar alarm could also reduce your premiums.
You can switch your home insurance policy at any time, so you don’t have to wait until your renewal notice arrives. If you find a better deal, contact your insurance provider who will either refund your remaining premium or, if you pay monthly, you will need to cancel your direct debit. There is normally a small admin fee of around £40, but this can usually easily be offset by the saving you will achieve by switching to a new provider.
Moving providers after a claim
If you are unfortunate enough to have to make a large claim, it’s a pretty safe bet your premiums will increase as a result. However, if you can get a better deal elsewhere you are perfectly entitled to shop around for another provider, but you will have to declare the claim if you do move your policy.
Some insurers may insist you are claim-free for a minimum four years, so your options may be limited if you make the decision to change providers. There are still some great deals available, though, so it is still worth doing some research, particularly as many insurers offer special introductory and online discounts to new customers.