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How to calculate the cost of your home insurance policy

This guide is designed to help you make sense of the otherwise tricky task of calculating your home and contents insurance

By Mehdi Punjwani

Published: 27 June 2019

The front of a cottage

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How much does house insurance cost?

The cost of combined home insurance fluctuates across the country, averaging at £146 per year according to MoneySuperMarket data from March 2020.

But while where you live is a factor in how much you can expect to pay for your home insurance, there are plenty of other reasons for this disparity in costs.

In fact, insurers calculate home insurance premiums with lots of considerations in mind. This guide highlights what they – and you – need to consider.

Buildings insurance vs contents insurance

 There are three ways you can buy home insurance: buildings insurance, which protects the structure of your home; contents insurance, which looks after what’s inside it, including possessions, fixtures and fittings; and combined policies, which insure buildings and contents. Buildings insurance is only available to the owner of the property, and not the responsibility of tenants to arrange.

Calculating buildings insurance

Buildings insurance covers the bricks and mortar of your home and pays out to rebuild it in the event of fire or other natural disasters and accidents. In effect, you are insured for the full rebuilding cost of the property – what it would cost to rebuy construction materials and permanent fittings, and to put them all back together again. It’s important to note that the rebuild value of your home is not the same as its market price, which is a calculation that includes the value of the land and the desirability of the area including local amenities and transport links.

This is a fairly difficult calculation to make as it relies on numerous variables, and it often leads to debate between when a policyholder makes a claim, so it’s in your interests to provide accurate details about the dimensions and specifications of your property when you first take cover out.

Luckily, you can hire a residential surveyor to make a solid estimate – especially if you live in a non-standard home, one for instance which uses unusual building materials. You can also use MoneySuperMarket which, with help from the Building Cost Information Service (BCIS), calculates a value using certain relevant details you provide about your home.

The factors which insurers take into account vary, but the following considerations are common:

  • The age of the house
  • Your postcode
  • The number of bedrooms
  • Foundations
  • Wall material
  • Roof materials
  • Floor material
  • Doors and windows
  • Applied decorations
  • Built-in fittings including fitted furniture
  • Utility installations, including heating, running water, gas, electricity, lighting, ventilation and sanitation
  • Outbuildings including garages and sheds

Loose fittings and furnishings, such as light fittings, carpets and white goods, are not included because they are covered by a contents insurance policy. Likewise, external features like boundary walls, fences, gates, paths and swimming pools may also not be included unless you ask.

It’s worth noting that if you make extensions to your home after taking out a buildings insurance policy, for example a loft conversion or a conservatory, you will need to recalculate the rebuild cost with your insurer. This is because the rebuild cost will more than likely have increased, and you may not be fully covered. Received industry wisdom recommends a reassessment of the rebuild cost every five years.

Because a buildings insurance policy covers the cost of materials, newer homes tend to be cheaper to insure. This is because modern materials are generally more abundant and easier to get hold of. Unusual or old buildings, including listed buildings, or those made of timber or which have flat or thatched rooves, will require specialist insurance.

Other factors insurers consider usually include:

  • Where in the country you live
  • The total floorspace of your property
  • Whether you live in an urban or rural area
  • What type of property you live in (if it’s a flat, you may not be able to get individual buildings insurance, as your property is not freestanding)
  • The age of the property

Calculating contents insurance

Contents insurance covers anything inside your home (or garage or shed). As a rule of thumb, anything you could physically remove from your home should be counted under a contents policy, including carpets, curtains, white goods, light fittings and items of furniture.

The average annual cost of a contents insurance policy is between about £90 and £110 across much of the capital – as well as on Jersey and Guernsey. At the cheaper end, it can cost as little as £50 in areas of Scotland and the north east – or just £41 per year should you choose to live on the Shetland Islands.

You are insured on the approximate value of the items in your home, for theft, fire damage, subsidence and other natural disasters, as well as mechanical errors like electrical problems and burst pipes. Working out how much your possessions are worth is easy, if time consuming: simply work out what everything would cost to buy as new, and tell your insurers. Any items worth more than £300 – things like bikes, furniture, appliances, gadgets and jewellery – should be mentioned separately, but anything cheaper than that can just be added to the total.

The best way to calculate your home insurance is to get a notepad and pen – or a tablet – and work through your house room by room, taking note of everything you feel is worth insuring, and adding up what it would cost you to buy them new in today’s market. Make a separate list for valuables and do the same.

Calculate my home insurance premium

If you’ve read this guide and now want to find out exactly how much your home insurance or contents insurance will cost, click here to answer a few questions on your circumstances. MoneySuperMarket works with 57 home insurance brands to compare the best home insurance deals for anyone's circumstances.

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