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How to calculate average home insurance costs

Confused about home insurance and contents insurance costs? This guide takes a closer look at how home insurance premiums are calculated, what affects the price you pay, and how to work out how much cover you need. 

how to calculate home insurance costs guide
how to calculate home insurance costs guide

How are home insurance premiums calculated?

The average combined buildings and contents insurance policy now stands at £145, according to data analytics firm Consumer Intelligence. (March 2021)

But the price you, as a household, will pay depends on a whole host of factors including where you live, the type of property you own and whether you’ve claimed previously. 

Ultimately, it all comes down to risk. If your home is at a higher risk of loss or damage, the more likely you are to make a claim on your home insurance, and the more you will pay for your premiums.

What affects the cost of my home insurance premiums?

When your insurer calculates your home insurance premiums, it will take the following factors into account:

Your postcode

Where you live can have a big impact on the price you pay. Insurers will assess risks such as the levels of crime, fire, flooding and subsidence in your area to help calculate your premiums. Urban areas tend to have a higher risk of burglary or fire, while rural areas tend to have a higher risk of subsidence or flooding. 

Your home’s proximity to water

If you live close to a stream, river, lake, reservoir or sea, you’ll likely pay more for your home insurance as the risk of flooding will be higher.  

Your home’s security

Having security features such as deadlocks on external doors, locks on accessible windows, and a burglar alarm, can all help to lower the risk of burglary, and thus reduce your insurance premiums.

The type of property

The type of property you live in will also be taken into account. Fire can spread more easily between terraced houses and flats, for example, which means premiums will be more expensive.

The size of your property

The size of your home is usually judged on the number of rooms. As a general rule, the larger your home, the more it will cost to rebuild, and the more you will pay for buildings insurance as a result. 

The materials your home is built from

Properties that are built from timber or have a thatched roof are a greater fire risk and therefore the cost of buildings insurance will be higher. 

Premiums also tend to be more costly if you live in a Grade 1 or Grade 2 listed building, or a converted barn or church, as repair work can be more expensive. In some cases, you may need to take out a specialist insurance policy.

The value of your belongings

The higher the value of your personal possessions, the more you will pay for contents insurance. Don’t be tempted to underestimate this though, as your insurer may only pay out a proportion of any claim you later make.

Your claims history

Whether you have made any home insurance claims in the past will also influence your home insurance premiums. Insurers tend to view those who have previously claimed as more likely to claim again in the future and you’ll pay more as a result. 

For each year you don’t claim, you will usually be able to build up a no claims discount which can reduce the cost of your premiums.

Additional factors

As well as the above, the size of your voluntary excess (the amount you pay towards the cost of a claim) and whether you select any additional cover options will also affect your home insurance premiums. 

Choosing a higher voluntary excess will lower your premiums, while bolting on additional cover options will make your policy more comprehensive but also more expensive. 

What will my insurer ask to calculate the cost?

When you run a home insurance quote, you’ll usually be asked for the following information: 

  • your address
  • details of your home, including the type of property, the number of rooms, the type of heating, and the year your home was built
  • the value of your belongings 
  • your property rebuild costs
  • whether your home has security features such as a burglar alarm 
  • details of any previous claims

How much should I insure my home for?

When taking out buildings insurance, you will need to insure your home for the full amount it would cost to rebuild from the foundations up. Rebuild costs don’t include the cost of land, so this figure will usually be lower than your home’s market value (unless your property is a listed building). 

The most accurate way to calculate your home’s rebuild value is to get your home surveyed. Alternatively, when you run a home insurance quote with us, we will estimate the rebuild cost of the property for you with the help of the Royal Institute of Surveyors (RICS). This will be based on details such as:

  • the property type
  • its location
  • the year your home was built 
  • the number of bedrooms and bathrooms
  • the materials your home is constructed from. 

If you’re taking out contents insurance as well, you’ll then need to calculate the value of all your belongings inside the property. 

Home insurance calculator

The best way to calculate the value of your belongings is to go through each room in your home and make a list of all your possessions and how much they are worth. Your list should include clothes, curtains, carpets, jewellery, kitchen appliances and furniture, as well as gadgets such as mobile phones and tablets. 

Alternatively, when you run a home insurance quote with us, we’ll estimate a total contents value based on your property details and the average amount insured by most UK households.

You’ll also need to factor in the value of any items worth more than your insurer’s single item (often around £1,500) as these may need to be listed separately on your policy to be covered. Expensive bikes may also need to be insured separately, and you may need to add on extra cover to ensure your belongings are protected if you take them outside your home. 

It’s important to be as accurate as possible when calculating how much cover you need. Underestimate and your insurer may only pay out a proportion of any future claims you make. Overestimate and you could end up paying more than necessary for your cover.

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