Avoid a 54% hike in your home insurance!

by Cliff D'Arcy on 03 September 2010  |  6 comments
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Why on earth did this writer's contents insurance premium increase by more than half?

In mid-August, I set off on a fortnight’s holiday -- a ‘staycation’ in Cornwall. However, before I left, I had several tasks to complete, including renewing my home insurance.

The only way is up

As a ‘last-minute Larry’, I usually renew my insurance policies just before they expire. So, the day before my contents insurance was about to expire, I grabbed my renewal notice. (As a tenant, I don’t need buildings insurance, as it’s my landlord’s responsibility.)

My first step is always the same: dig out last year’s quote to see by how much my premium has increased. Call me a cynic, but not once in my adult life has any insurance premium gone down from one year to the next.

Therefore, I naturally assume that all insurers have an upwards-only rule towards renewal premiums. After all, why reduce their premiums when there’s no need to?

54% more, please

Despite seeing some hefty premium hikes in the past, I was shocked to find that my renewal premium was set to rise as follows:

Wow, a 54% increase -- that’s more than half of my previous premium on top. As I said, I’m used to renewal quotes creeping up, but this is beyond a joke.

It’s only a quote, not a contract

Of course, it’s vital to remember that a renewal quote is merely the price your insurer wants you to pay and not the price you should pay.

Indeed, I regard all renewal notices purely as reminders to shop around for a new quotation. This is because insurers rely on the loyalty (or laziness) of existing customers to renew without making a fuss. Hence, automatically renewing any insurance policy without shopping around is madness, because you’re going to get fleeced like a trusting sheep!

So, before you do anything else, get a quick quote online, so you know what kind of price you should be offered by your current insurer.

Get on the phone

Next, grab last year’s and this year’s quotes, and get on the phone to your insurer. Like many companies, my insurer's renewal helpline is a non-geographic 084x number, which aren’t free on my landline tariff. Instead, I used Say No To 0870 to find a geographic alternative and then called that number,

It soon became clear why my premium had risen so much. In my first year as a policyholder, my insurer had provided me with one year’s free cover for ‘HomeRescue Plus’. This provides a 24-hour emergency helpline to call in the event of flooding, broken windows, damaged locks and so on, plus up to £250 towards emergency repairs (including call-out and labour charges).

At last, the ‘mystery of the massive premium hike’ was solved. Not being a new customer, this emergency service was no longer free. In fact, it would cost £2 a month, adding £24 to my annual premium.

Thanks, but no thanks

Having worked in insurance since the early Nineties, I know that home-emergency policies are extremely lucrative for insurers. This is partly because many policyholders forget (or aren’t aware) that they’ve paid for this service, rendering it useless for a significant proportion of customers.

Thanks to low levels of claims, the underwriters of these policies can offer generous commissions to insurers and brokers for flogging home-emergency cover to their customers. Of course, anything that’s a money-spinner for insurers is a no-no for me, so I politely declined to renew my home-emergency cover.

Subtracting the £24 cost from my quote lowered my home insurance premium to a much more attractive £51.40. This was a mere £2.50 more than the £48.90 which I paid last year -- an increase of just 5.1%. This increase was much more palatable to swallow than 54%.

And, because I had shopped around online beforehand, I knew it was also a very good offer. So I was happy to accept it there and then!

Lessons to learn

If you want to curb the cost of your home insurance, then I recommend the following steps:

1. NEVER automatically renew an existing policy without checking to see by how much your premium will rise this year.
2. If your premium is more than, say, 5% higher, then call your insurer to find out why it is demanding an inflation-busting rise.
3. Carefully check your policy documents to see exactly what you’re buying. Look for unnecessary or overpriced add-ons such as home-emergency cover, legal-expenses insurance, identity-theft protection, and so on.
4. Decide whether you really need additional protection such as accidental-damage cover and personal-possessions (away from home) cover. These can steeply bump up your premium.
5. Always search online for a better-value policy before you renew.

If you choose to ignore these five lessons, then you may as well throw money down the drain!

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