House Insurance Premium: What's The Cost?

A house insurance premium is the amount of money you pay to keep your insurance policy active. The premium is calculated based on your circumstances, the cover you've chosen, and the likelihood and cost of claims. The total premium also includes GST and other statutory taxes and charges, such as government stamp duty and Emergency Services Levies.

The premium you pay is influenced by factors such as the location of your home, the year it was built, the value of your insured contents, and the people in your household.

Home insurance covers the building and its fixtures, as well as legal costs in certain situations

Home insurance is a necessity, offering financial protection against damage to your home and belongings. It covers the building and its fixtures, as well as legal costs in certain situations.

Building and Fixtures

Home insurance covers the cost of repairing or rebuilding your home and its permanent fixtures if they are damaged or destroyed. This includes detached structures such as garages, sheds, fences, and gazebos. It also includes permanent fixtures like swimming pools, built-in air conditioners, and dishwashers.

Belongings

Home insurance covers the possessions within your home, such as furniture, electrical appliances, and clothing. Some policies also cover portable items taken outside the home, like jewellery, at an additional cost.

Additional Living Expenses

If your home becomes uninhabitable due to damage, your insurance will cover additional living expenses such as hotel bills, restaurant meals, and parking costs.

Liability Protection

Home insurance provides liability protection if someone is injured on your property. It covers medical expenses and legal fees if you are sued. It also covers damage caused by your pets.

Optional Endorsements

You can purchase optional endorsements to increase coverage limits or protect specific items or situations. For example, you can buy extra coverage for valuable items like jewellery, watches, art, and collectibles that exceed the limits of a standard policy.

Exclusions

It is important to note that home insurance does not cover all situations. Standard policies typically exclude flooding, earthquakes, routine wear and tear, and damage due to insufficient maintenance.

Contents insurance covers household items and personal belongings

Contents insurance covers your household items and personal belongings if they are damaged, lost, or stolen. This includes items such as furniture, clothing, computers, fridges, televisions, tools, and jewellery. Contents insurance can be bundled with home insurance, which is usually cheaper than having separate policies.

When choosing contents insurance, consider the value of your belongings and what you can afford to replace or lose. Most contents insurance offers the replacement value of your belongings, sometimes called 'new for old' cover. This type of cover is more expensive but provides better protection. Some policies offer the value of your lost or damaged belongings, which may depreciate over time.

When you make a claim, insurers may repair or replace the damaged items or pay you the cost of repairing or replacing them. It is important to calculate the value of your belongings to determine how much cover you need and which items are worth insuring. Consider adding accidental damage cover if you want protection against mishaps like staining your couch or breaking a vase.

Contents insurance covers loss and damage caused by defined or insured events such as fire, storm, theft, and vandalism. However, it is important to check what is not included in the policy, such as damage caused by floods or intentional criminal damage. Additionally, some items may not be covered, so decide if you want to add extra protection for portable items like handbags, glasses, cameras, bicycles, mobile phones, tablets, or laptops, as well as valuable items like jewellery and special collections.

If you rent your home, renters insurance is a good option as it is usually cheaper and may cover accidental damage to the house and legal costs if someone injures themselves on the property. However, renters insurance has more exclusions and limits than regular contents insurance.

Most policies have maximum amounts on how much you can claim for certain items, so check the limits and adjust your excess accordingly. You may be able to save on your premium by increasing your excess or bundling your contents insurance with your home insurance. Additionally, you may get discounts for having security features like deadlocks, fire extinguishers, smoke alarms, or a security system.

When renewing your contents insurance, update your policy to reflect any changes, such as adding cover for special items or new items. Get quotes from multiple insurers to find the best value and ensure you are getting the right protection for your needs.

Sum-insured cover is when you estimate how much it would cost to rebuild your home if it was destroyed

When you take out a home insurance policy, one of the most important considerations is ensuring that you have sufficient coverage to rebuild your home if it is destroyed. This is where the concept of a sum-insured cover comes into play. With this type of cover, you are essentially estimating the cost of reconstructing your home if it suffers a total loss. This includes factoring in the costs of materials and labor, as well as any unique features or customizations that your home may have.

The process of estimating the sum-insured involves considering various factors. Firstly, you need to assess the current construction costs in your area. This can vary depending on the region and the prevailing market rates for building materials and labor. It is important to get an accurate sense of these costs to ensure your estimate is up-to-date and reflects the actual expenses you would incur if you needed to rebuild. You can consult with local builders, contractors, or even insurance professionals to gain a better understanding of the prevailing construction costs.

Next, you need to consider the specifics of your home. The size, structure, and features of your house will all impact the overall cost of reconstruction. Take into account the square footage, the number of stories, the type of foundation, and any special architectural details or finishes that would need to be replicated. If your home has custom cabinetry, high-end appliances, or other specialized features, make sure to include the cost of replacing these items in your estimate.

It's also crucial to factor in any additional structures on your property, such as garages, sheds, or fences. These may need to be rebuilt as well, so their replacement costs should be included in your sum-insured calculation. Don't forget to consider site clearance and debris removal costs, as these can add up significantly, especially if your home is located in an area prone to natural disasters, such as hurricanes or earthquakes.

To make the estimation process more accurate and comprehensive, you can use online tools and calculators provided by insurance companies or third-party sources. These tools often take into account various factors, including location, construction type, and building features, to give you a more precise estimate of the reconstruction cost. It is always a good idea to review your sum-insured amount periodically, as construction costs can fluctuate over time due to changes in the economy and market conditions.

Finally, it is worth noting that while estimating the cost to rebuild your home is a crucial step, there are other aspects to consider when purchasing home insurance. For example, you also need to insure the contents of your home, such as furniture, appliances, and personal belongings, which are typically covered under a separate section of your policy. By taking the time to understand all the components of a home insurance policy and carefully considering your sum-insured cover, you can ensure that you have adequate protection in the event of a total loss.

Total replacement cover is when you insure your home for the total amount it would cost to repair or rebuild it

Total replacement cover is a type of home insurance that covers the total amount it would cost to repair or rebuild your home in the event of damage or destruction. This is different from sum-insured cover, where you estimate the cost of rebuilding your home if it were destroyed, and your policy premiums and claim payouts are based on that amount.

With total replacement cover, you don't set a cover limit. Instead, the insurer pays the total cost of rebuilding your home. This means that you're less likely to be underinsured, but it also tends to be more expensive.

Total replacement cover is typically offered as an optional add-on to standard home insurance policies. It's worth considering if you're unsure about how much it would cost to rebuild your home, as it can give you peace of mind that you'll be able to afford the rebuilding costs if disaster strikes.

However, receiving the funds from a total replacement cover policy can take longer, as the insurer will need to complete an assessment of the damage. It's also important to note that not many insurers offer this type of cover, and it may not be available in your area.

To calculate the replacement cost of your home, you can use online calculators that take into account current building and replacement costs, or you can use more sophisticated methods that factor in local wage rates, material costs, the quality of finishes, the nature of the building site, and other variables.

You can adjust your excess, which is the amount you pay towards a claim

When it comes to home insurance, you'll usually come across the term 'excess'. This is the amount you pay towards a claim before your insurance provider pays out. There are two types of excess: compulsory and voluntary.

Compulsory excess is set by your insurance provider and is mandatory for all policyholders. Voluntary excess, on the other hand, is optional and agreed upon between you and your insurance provider. You can choose to pay a higher voluntary excess, which could result in a lower premium as you'd be contributing more towards any claim you make.

However, it's important to strike a balance. While increasing your excess will save you money on your premium, you don't want to be burdened with an excess you can't afford to pay. A high excess is beneficial only if you don't make a claim. Therefore, it's crucial to weigh your options carefully.

Both types of excess will be deducted from the amount paid out by your insurance provider, or you'll have to pay the total excess to any repairer or supplier. For instance, if your compulsory excess is £150 and your voluntary excess is £250, your total excess on the policy is £400. If you make a claim for £1,000, your insurer will deduct £400, leaving you with £600.

You can adjust your excess when comparing quotes to see how it affects your premium. While a higher excess can reduce costs, it's essential to ensure that you can afford the combined total of compulsory and voluntary excess in the event of a claim.

Additionally, the world of home insurance is highly competitive, so you have a wide range of policies to choose from. You don't have to settle for a policy with a high excess if you prefer a smaller one. It's important to find a policy that suits your needs and offers the right balance between excess and premium.

Frequently asked questions