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Home insurance UK price index

See how much home insurance costs in the UK, based on more than seven years of data and millions of customer quotes

Latest quarterly data reveals that average premiums for a home insurance policy (combined buildings and contents) remain high, increasing again by 0.87% over the last year. This keeps the average cost of a combined home insurance policy at £146 – up from £116 (a rise of 26%) in four years since 2016.

Last updated November 2020 • 8 min read

Home insurance premiums continue to climb

  • Latest data shows the average price of combined buildings and contents insurance stood at £145.92 in the third quarter of 2020 (July, Aug, Sep)
  • Premiums remain high, adding £1.26 to an average policy compared to a year ago
  • Buildings-only policies cost an average £112 while contents insurance stood at £67

Home insurance premiums rose by 0.87% in the third quarter of 2020 – July, August and September – compared to the same quarter in 2019. The average price of combined buildings and contents insurance stands at £146 having increased for the last four years. Premiums for home insurance remain high despite a small decrease of 0.08% on the previous quarter.

The average price of combined buildings and contents

£146

In Q3 2020

Home insurance premiums remain close to their highest point since 2013, having risen steadily in the last few years.

At the end of 2016 the typical cost of an annual combined buildings and contents policy was just under £116. As we move into the final months of 2020 this has risen by £30 – an increase of 26% in four years.

While the rate of increase year-on-year has slowed and is down a marginal 0.08% compared to the previous three-month period, premiums for home insurance are high and show little sign of dropping in the short term.

Building and contents as separate policies

Buildings-only policies continue to see sharp premium increases. Year-on-year, average prices have risen by 5%, from £106.50 to £111.71.

Year-on-year, contents-only policies increased by 2% (£1.16) from £65.69 to £66.85, adding another 36p to the average premium compared to the last quarter.

Combined policies often do not reflect the increase in separate buildings and contents policies because insurers often provide a premium discount to customers who buy both elements together.

Why do premiums remain high?

There are several possible drivers behind the continued high home insurance premiums recorded during Q3 of 2020.

Covid-19 lockdown – which ran from 23 March until restrictions started to ease in June – may have played a part. Many people were at home – working, schooling, doing DIY and even exercising – so the rate of accidental damage is likely to have been much higher than usual – and more claims spell higher costs for insurers.

Homeowners and landlords could have been forced to delay necessary repairs or put temporary fixes in place, as tradespeople and materials were in short supply in the lockdown. But this may have led to higher claim numbers when inevitably temporary fixes failed and things went wrong.

On the flipside lockdown probably meant fewer house burglaries and a reduction in common ‘escape of water’ claims (with people at home to detect leaks before serious damage is caused). This could suggest home insurers received fewer of these types of claim during lockdown.

It should also be noted that accidental damage is often a bolt-on to standard home insurance policies which many policyholders may not have.

Finally, simple inflationary pressures on the home insurance market may have also played a part.

Home insurance premiums over time

 
home insurance
The nation has arguably never spent more time at home as during the Covid-19 lockdown. And while this increases the risk of accidental damage, it also significantly reduces the chance of burglary. The longer-term impact of these contrasting factors on home insurance premiums remains to be seen.
Couple in kitchen
Insurers tend to reserve their best prices for new customers, which is why it’s always worth shopping around at renewal.

What about movement in premiums over the next year?

We are facing an uncertain time ahead with potential triggers for both increases and falls in home insurance costs.

Home insurers have been told by the regulator the Financial Conduct Authority to keep some financial reserves in place. This cash is to provide assistance to customers who might be struggling to pay home insurance premiums due to job loss or disruption due to coronavirus. This financial help could mean a deferral of premium payments for up to three months, among other possible measures. But it means premiums for other customers are likely to rise to foot the bill.

The full impact of this year’s flooding has also yet to filter through as these claims can take months to be resolved. But large numbers of expensive claims could put pressure on premiums meaning costs rise for all customers.

The government’s stamp duty break on property worth up to £500,000 is likely to see a spike in home moves between now and 31 March 2021 – the deadline for the incentive. Any increase in numbers of people moving has a direct impact on demand for new home insurance policies, both combined policies and buildings-only cover – often the preferred choice of buy-to-let landlords.

A rise in demand for home insurance could fuel competition among providers to offer the best deals and this might lead to a fall in premium prices.

What about in the longer term?

Some of the issues around climate change point to longer-term increases in home insurance premiums.

A rise in weather-related claims will apply upward pressure on premiums. The early part of 2020 saw several severe storms, including Dennis and Ciara, resulting in flooding across many areas including south Wales, Herefordshire, Shropshire and Worcestershire, for example. There could be more in store for 2021 and beyond.

Subsidence is also a growing problem in some parts of the UK due to warmer weather and drier ground.

Even with costs now at their highest level in several years, many policyholders will continue to see higher prices when their existing insurer sends out renewal quotes.

The best way to avoid this is to shop around every year and take advantage of the lower prices on offer through MoneySuperMarket.

Another issue which could lead to increased insurance costs is the growing number of high-value portable gadgets which are easy picking for burglars.

Home insurance premiums over time

 
“Premium rises of 0.87% recorded over the last year may not feel too painful. But the figures mark a more significant rise of 26% compared to three years ago.

“And with the longer-term outlook for home insurance premiums potentially one of more rises, it’s crucial for consumers to take matters into their own hands and shop around for the cheapest home insurance premium at every renewal.”

Average premiums by region

  • London saw the most expensive combined home insurance premiums in Q3 2020 at £213.59/li>
  • Those in the North East pay the least on average, with combined premiums of £120.77
  • Burglary is more of a problem in urban areas, which is one reason why London has higher premiums than other parts of the UK. Parts of south-east England, including London, are also prone to subsidence

Bigger towns and cities tend to have higher crime rates, which can contribute to higher costs.

The area where you live is one of the biggest factors when it comes to calculating the cost of home insurance. Insurers set prices according to the likelihood of claims from fire, flood, subsidence and burglary, for example, using the number of related incidents in any given postcode.

Insurers are also concerned that climate change will trigger more frequent and more violent bouts of extreme weather, leading to floods, storms and associated damage. Any reductions in rainfall over the long term may also lead to an increased number of subsidence claims. Particular areas of the country are more prone to flooding or subsidence, for example.

As far as belongings are concerned, the biggest perceived risk on a day-to-day basis is burglary. This is more of a problem in urban regions, which is one reason premiums are much higher in London compared to other parts of the UK.

 
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How property type affects home insurance costs

  • People living in flats or apartments pay the highest premiums on average* for combined buildings and contents insurance, at £151.02
  • The cheapest premiums on average apply to those living in a bungalow, at £127.66 for buildings and contents insurance
  • 75% of people who live in a flat or apartment buy contents insurance only. Buildings insurance in such circumstances is often the responsibility of the leaseholder or landlord

The type of property you live in can make a big difference to your risk profile from an insurer’s perspective – and this might push up the cost of your insurance.

Properties with shared access can be more susceptible to break-ins, for example, while homes that are attached to each other, such as terraced houses and properties subdivided into flats, can be more at risk of damage by spread of fire or leaked water.

Those living in flats and apartments with shared access typically pay higher premiums for combined insurance (buildings and contents), at an average £151.02.

The average premium for a house stood at £148 in Q3 2020, while bungalows saw the lowest premium by property type in the quarter at £128.

The good news is all households can save money on their home cover by shopping around at renewal.

*excluding ‘other’ properties such as bedsits and halls of residence for which there is low volume

house

£148

Average combined buildings & contents premium for a house
bungalow

£127

Average combined buildings & contents premium for a bungalow
flat

£151

Average combined buildings & contents premium for a flat/apartment
townhouse

£137

Average combined buildings & contents premium for a town house

All premium price data is based on the median cheapest on screen price for the given period that customers see when running a quote. Premiums are therefore based on MoneySuperMarket customers only and are representative of the UK average.

From October (Q4) 2018 onwards the on screen price also includes add-ons in line with IDD, as such it may not be accurate to compare figures pre and post this date.

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