Home insurance costs hit a record high

Home insurance costs have tipped a record high – with the average cost of a combined buildings and contents policy reaching £205.55.

As the Bank of England revealed inflation has soared to a 20-year high of 5.2 per cent, fuelled by increasing energy costs, the worry is prices will continue to rise over coming months.

Home insurance costs have pushed up by 14.3 per cent over the past 12 months, according to the latest AA Home Insurance Index for the three months ending September 30.

Standalone contents policies went up 2.2 per cent to £77.21 in the quarter and 5.8 per cent in the year.

The AA points out that home insurance costs changed little over many years despite big claims from events like bad flooding in 2007.

“Since then, we’ve gone through two severe winters that caused widespread property damage throughout the UK.,” said the AA’s Simon Douglas. “Insurers are also concerned about more frequent severe weather events such flash floods, wind damage and even damage from extreme hailstorms, lightning strikes and tornadoes.”

One recent industry report suggests storm damage claims have jumped by 68 per cent in a year.

“There has been a lot of focus on the sharp rises in car insurance premiums – yet over the past couple of years, the cost of insuring your home as been steadily rising too. I believe the price will continue to do so for the foreseeable future,” said Douglas.

“Insurers need to consider the potential for future claims and ensure that they have adequate reserves to meet the cost of any extreme and widespread weather damage, for example major flooding or more severe winters.”

The AA also noted the cost of fixing weather damage has also risen in line with premiums, and contributes to the increasing cost of home insurance.

Leaks from failed or frozen pipes are cited as the main cause of home insurance claims.

“Quite apart from the damage and distress caused by water bringing down ceilings and ruining furnishings, it could still hit you in the pocket after insurance has covered the costs,” said Douglas.

“Although no-claims bonuses are less common on home insurance policies, if you have suffered a loss or made a claim then you will need to disclose this to your insurer.  It could well increase your premium the following year.”

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