When you apply to take out a home insurance policy your insurer will take into account a number of different factors in order to determine how much you will be expected to pay.
They start by asking you how much cover you require as this has the biggest influence upon your premium price; obviously the greater the amount of cover, the higher the premium. If you are in the market for buildings insurance then you need to provide your insurance provider with the full cost of rebuilding your home if it were completely destroyed by fire or flood. The rebuilding cost is very different from the full market value of your home and can usually be found in your survey documents. It is also usually considerably less than the market value so be sure not to confuse the two as you could end up paying for more cover than you actually need. If you rent your home and only require contents insurance then, again, it is important to calculate accurately how much the contents of your home are worth. An easy way of doing this is to walk through every room in your home making an inventory of every item and its value. Don’t make the mistake of underestimating how much your possessions are worth as you run the risk of receiving a pay-out far lower than is required to replace all of your items if they were completely destroyed. In addition, you will need to tell your insurer if you have any items that are of particularly high value (usually over £1000) as these will need to be insured separately.
Another important factor that insurers use to set the price of your premium is the excess on your policy. Most policies have two excesses; one is fixed and yet the other is voluntary and can be set at anything from zero to hundreds of pounds. The higher the excess, the lower your premiums, but, before you set your excess too high in order to save on costs, remember that the excess is the amount that you will be required to pay towards any claim that you may make; so keep it affordable.
Once your basic premium price has been calculated you will most likely be offered a number of optional extras which you can add to your policy if you so choose. These extras are chargeable so will bump up the cost of your premium. If cost is an important consideration then try to keep these optional extras to a minimum.
One of the most popular optional extras is accidental damage cover. This means that if you, for example, spill wine on an expensive rug, or a pet knocks over your television, you can claim for a new one. You may also be offered cover for items that you take with you whilst away from home such as mobile phones and laptops. Again, you set the amount of cover your require so make sure that the figures you supply to your insurance company are accurate; too high and you will end up paying for far more cover than you need, too low, and you will be significantly out of pocket should you need to make a claim.
Where you live will impact upon the cost of your premium. If the area in which you live has a high crime rate then you will be expected to pay more as the subsequent risk of you experiencing a break-in will be greater. In addition, if you live in an area that has experienced flooding in the past your premiums will be higher as you pose a greater risk to your insurance provider.
The good news is that not all factors used to determine the cost of your premiums are out of your control. You can reduce costs by installing burglar alarms, secure locks on outside doors, and security lighting.
If you own your home but rent it out to tenants then you will need to take out buildings insurance; the responsibility of taking out contents insurance rests with your tenant unless the property is fully furnished (in which case it would be advisable for you to take out both buildings and contents insurance). A buildings insurance policy for landlords will usually prove more expensive for landlords as insurance providers anticipate that tenants are less likely to take care of the property than homeowners.
Finally, your claims history will also affect the amount you are asked to pay in premiums. Your premiums will rise the more claims you make so think carefully about claiming if it is for a relatively small amount; especially if you have a high excess on your policy.
Many of the factors that insurers take into account when determining the cost of your buildings and/or contents insurance are out of your control. However, by paying particular attention to the sums assured, taking adequate security measures, only taking out additional extras if you really need them, and making as few claims as possible, you can keep the cost of your premiums to a minimum.