Why Is My Home Insurance Premium Increasing?
At Higos, we understand when your home insurance is due for renewal, the last thing you want is to see the premium has increased. You may even have made no changes to your policy throughout the year and still notice the premium has gone up. But what are the reasons your renewal premium is going up each year? That's why we’ve put together a list of some of the factors that could be impacting the rise in your insurance premium.
How is your household premium calculated?
Whilst there are many factors that can contribute to your household insurance premium increasing, one of the most important factors to remember is although you’re paying for your insurance to ultimately payout if you need to make a claim, the premium you pay is also going into a much larger central money pot. The central money pot is particular to each insurer and everyone will pay into their own insurers central money pot, it’s not just one individual person paying in.
Why am I paying into a central money pot?
The biggest reason your money is going into a central money pot is for insurance claims, however you may be asking “but I haven’t made any claims”? This is because the central money pot will not only pay out for your own insurance when making a claim, but will also be spread further to pay out for claims made by other policy holders who are with the same insurance provider.
Example: A severe weather event occurs with high amounts of rain and strong winds impacting the UK, causing flooding and damage to homes and multiple policy holders claiming for storm/flooding damage on their policies.
How it works: The central money pot that everyone has paid into for their particular insurance company will then pay out for insurance claims made by multiple policy holders. However due to the high volume of claims for a particular incident, the central money pot may need to spread further than initially expected to pay the claims. This therefore will increase the insurance premium for everyone so that there is enough money to go around to payout for the claims.
This may sound a tad unfair to be paying into a central money pot to payout for claims that’s not your own. However the only place insurers can recover the money from is ultimately the consumer. A £200 home insurance policy wont be enough to cover you if you need to make a claim for £50,000 worth of storm damage to your house. The insurer will need to find the money somewhere to pay out the claim and the central money pot that everyone has paid into will provide the extra sums of money.
Mid-term changes
Whilst there are many factors to why your home insurance may have increased it’s important to remember that every insurance policy for each person will be different to another person’s policy. Particularly if you’ve made changes to your policy during the course of the year such as moved address, your new home could be valued higher to rebuild than your previous home.
Even the postcode for the area you are in could affect the price of your policy. This is because insurers will use public data on the properties in the local area to work out the insurer premium. If there have been a high amount of claims in the area such as theft or flooding this may increase your premium.
The materials used in the construction of your property can also impact on the price of your insurance premium. For example if you move from a home with a conventional tiled roof to a thatched roof this may raise your insurance premiums because of the fire risks associated with thatched properties.
It's important to update your policy to reflect any recent home improvements or changes in property value. This will help to ensure you’re covered for claims, such as storm, flood, and other weather-related damages. This also helps in understanding any limitations or exclusions, allowing you to adjust coverage as necessary for comprehensive protection.
Insurance premium tax
Insurance Premium Tax (IPT) can be a factor increasing your home insurance premium. IPT is a tax on insurers which is paid directly to the Government, like VAT, this will apply to most general UK insurance premiums. When the Government increases the tax, insurance providers usually pass this on to their customers.
Claims
Any claims made in the last 5 years will be taken into consideration when calculating your insurance premium. An increase in premium will depend on the claim’s type, size and number of claims filed in the past 5 years. The more claims you make, the more your premium will go up this is because insurers will see you as a higher risk.
Climate change claims
Due to climate change the UK has been severely affected by the increase of storms and flooding. Since January 2024 the UK has had three significant storms which have impacted the UK considerably resulting in more claims on home insurance.
Energy crisis
The European energy crisis has had a huge impact in the UK creating a very difficult environment for insurers. This has led to increased energy prices for home insurance which is primarily due to the additional costs for insurers as they try to cover the increased expenditure caused by higher energy prices.
Due to the energy crisis people typically have been cutting down on their electric and gas consumption to help reduce costs. Unfortunately this can add to the increase for insurance premiums due to claims for burst or frozen pipes.
Rising repair costs
Over the past few years the cost to repair or replace standard items such as televisions, tablets and lighting has increased. This is due to rising energy costs, inflation, labour shortages, cost of labour, additional costs to import parts and materials and problems with the global supply chain, resulting in more expensive insurance premiums.
Bespoke Higos Home & Contents Insurance
At Higos, there’s nothing we love more than finding you the right home and contents insurance so you can be confident you're thoroughly protected. That’s why we’ve built an expert home and contents insurance team, providing specialist insurance cover that's tailored specifically to you.
And if the unexpected should happen, we have an in-house claims team ready to provide a prompt and personal service.
If you’re interested in speaking to a chartered insurance broker for advice or you would like a quotation for contents insurance get in contact . Alternatively fill out our online request a call-back form and a member from our specialist home insurance team will call you back.