What's happening to home insurance premiums?

The average cost of home insurance premiums rose by 6% in April to June, according to the latest data from the Association of British Insurers (ABI).

The rise bucks the trend seen for car insurance premiums, which the ABI reported as dropping during the same time period. 

Data from comparison site GoCompare - which is based on quotes - also showed the cost for home insurance climbed by 8% in the second quarter of 2024. 

Here, Which? takes a closer look at the price of home insurance, why costs are rising and how to pay less.

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What's happening to home insurance prices?

The ABI's latest report shows the average price for a combined buildings and contents policy rose to £396 in April to June 2024, from £375 in the first three months of the year. 

That's a quarterly rise of 6%. Compared to the same period in 2023, the figures show average premiums have increased by 19%. 

Similar price hikes can be seen if we look at buildings-only and contents-only policies. Average costs for these two types of cover have risen 7% and 4% respectively, between the first and second quarters of this year.

However, when adjusted for inflation, home insurance premiums are still cheaper than in 2017, when the ABI started collecting this data. In real terms, the average cost for a combined policy in the second quarter of this year is 2.5% less than seven years ago, when a combined policy would have set you back an average of £406.

Released every three months, the ABI's data gives the most accurate picture of the market as it's based on prices consumers are actually paying, rather than quotes, and combines both renewals and new policies.

This chart shows how the average cost of a home insurance premium has risen since January 2022:

Comparison sites publish data as well, but their figures only reflect quotes given to customers searching for home insurance.

New data from Go Compare shows the cost of insuring a home rose by 8% in the second quarter of 2024, taking the average price of combined contents and buildings cover from £224 to £241. Overall, home insurance is 32% more expensive than the same time last year, and 56% higher than in 2022.

Compare the Market's latest report shows the cost of home insurance climbed by 39%, from £262 between April and June last year to £363 during the same period in 2024.

Research from Consumer Intelligence, released on 11 June 2024, found the average quoted price of home insurance was 41.6% higher in April 2024 than the same month last year. It's the biggest jump in premiums since the insurance price experts started tracking costs in 2014.

Homeowners with buildings claims hit hardest

Consumer Intelligence data showed customers who'd previously made buildings claims experienced the biggest annual rise of 50.3%, followed by a 49.8% price hike for those who'd made water damage claims. 

Theft-related claims also resulted in a 43.7% surge in the cost of premiums, with other damage claims leading to a 46.4% climb. 

In contrast, customers with no claims saw a 40.9% adjustment.

• Find out more: best home insurance

Why is the cost of home insurance so high?

Nathan Blackler of Go Compare blames inflationary pressures and the rising cost of materials and labour for pushing up the price of settling claims. Insurers are passing on these costs to customers through increased premiums.

The latest ABI figures show insurers paid out £1.4bn in claims during April to June 2024 - a 5% increase on the first three months of the year when pay-outs reached £1.3bn.

Bad weather continues to be the main driver behind the increase in claims pay-outs. Claims for damage to homes from storms, heavy rain and frozen pipes reached £144m in the second quarter of 2024. This is the fifth consecutive quarter that weather-related claims have been above £100m.   

Last year, the quick succession of storms Babet, Ciaran and Debi between October and November caused £352m of damage to homes and led to a surge in weather-related claims in 2023, worth a total of £573m. It was the most on record and damage caused by flooding made up the lion's share of claims.

Go Compare data shows claims for flood damage have more than doubled in the last year. Compare the Market figures for the second quarter of 2024 found home insurance for properties that had previously flooded is now on average £100, or 27%, more expensive than in April to June last year, when the average quote was £373. 

The difference between insuring a property that has previously flooded and one that has not has also increased year-on-year, from £203 to £249, a jump of almost a quarter (23%). 

• Find out more: does home insurance cover flooding?

Ways to save on home insurance

The cost of home insurance may be rising, but there are several ways to mitigate any premium price hike:

1. Shop around

This should always be your starting point. But with so much choice, choosing an insurer can be hard. 

Price comparison sites that allow you to view multiple quotes at a glance are a good place to start. The main ones for insurance are Compare the Market, Confused.com, GoCompare and MoneySuperMarket.

To get a clearer idea of how different home insurance policies compare, you could also take a look at our guides on the best contents insurance and buildings insurance. We've rated policies from dozens of insurers to help you choose the right cover.

But remember, not all providers are on there. Which? Recommended Providers Direct Line and NFU Mutual are examples of this. 

2. Don't automatically renew

Never agree to the auto-renewal clause included in your 12-month home insurance agreement. This means that once your initial one-year contract lapses, you will be automatically enrolled for another year.

Instead, use the best quotes you've gathered to negotiate with your insurer and take your new business elsewhere if it doesn't improve its offer.

3. Renew early

If you leave arranging home insurance until the last minute, generally speaking, insurers are likely to charge you more than if you bought the cover a few weeks in advance of the cover starting.

Try buying your insurance weeks (rather than days) ahead of the policy going live. 

4. Pay annually

Paying by the month for your cover can make it more manageable within your budget, but it can be the most expensive option overall. 

You're effectively borrowing the year's premium to repay in instalments. This typically comes with interest, hiking your annual cost.

5. Cheaper isn't always better

Opting for the very cheapest policy you find won't necessarily save you money in the long run.

If your policy comes with steep excesses or significant exclusions, you'll feel the pinch when it's time to claim. This means it's vital you check the policy details carefully before buying the cover. 

• Find out more: how to find cheap home insurance

This article is regularly updated with the latest figures from the ABI and other home insurance indices.

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