It is important for homeowners to know how the value of your home affects your home insurance premiums.
Insurers check several factors to decide the cost of your home insurance cover. They look at market value,
rebuild cost, location, and risk factors. This guide will explain these points. It will also help you ensure
you have the right amount of cover to protect your property.
What Determines the Cost of Home
Insurance?
The cost of your home insuranceis based on several key factors. It’s not just the
market valueof your home that matters. Insurance companies also consider specific details
about your property and how much risk it carries. They use this information to calculate your
insurance costs.
Market Value vs. Rebuild Cost
Many people think that home insurance depends on the market value of their house. This is a common
misunderstanding. Actually, insurance companies use the rebuild cost to determine the right amount of cover
you need.
Market Value: This is how much your home would sell for in the property market. It
can change based on demand and the home’s location.
Rebuild Cost: This is the amount needed to rebuild your home completely if
something happens. It includes the costs of labour, materials, and expert fees.
The Association of British Insurers (ABI)recommends using the Building Cost
Information Service’s House Rebuilding Cost Calculator. This tool can help you determine the
correct rebuild cost.
Size and Type of Home
A larger homewith more bedroomsoften leads to higher home
insurance costs. This is due to the increased rebuild cost.
If your home is a listed building, rebuilding it can be much more expensive because
of conservation rules. You might need additional coverfor this type of property.
Location and Postcode
Your postcodeis important for finding out your home insurance premiums.
Homes in areas that have risks such as flooding, land sinking, or high crime tend to have higher premiums.
This happens because the chance of an event of a claimis greater in those places.
Value of Your Contents
If you choose to insure your belongings, the value of your contents will affect your insurance costs. Items
that are expensive, such as jewellery, antiques, or electronics, may require additional cover beyond a
regular policy.
It’s important to have good home insurance cover. This helps you avoid being underinsured or
overpaying.
Professional Assessment
Hiring a surveyorto determine the rebuild costof your house can provide you
with an accurate estimate. This is especially useful if your home has unique features or was built in a
non-traditional way.
Reviewing Your Policy Regularly
Renovating or adding to your home can increase your rebuild cost.
If you buy costly things, check the value of your contentsto be sure they are
covered.
It’s important to regularly check that your home insurance coveris sufficient.
What Additional Cover Options Are
Available?
Depending on what you have in your home and its location, you may want to consider additional
coveroptions. This can help protect you from specific risks.
Accidental Damage Cover
It helps protect your home from surprise issues. This includes things like a broken window or damaging a
kitchen surface.
Flood and Subsidence Cover
If you live in an area that faces a high risk, you may want to add floodor
subsidenceprotection to your policy.
Home Emergency Cover
It helps with urgent issues. This can include things like boiler breakdowns or electrical failures.
How to Reduce Your Home Insurance
Costs
There are several ways to lower your home insurance premiums. You can do this while still having good
coverage.
Increase Your Excess
Choosing a higher excess (the amount you pay when you make a claim) can help you lower your insurance costs.
Improve Home Security
Installing alarms, CCTV, and secure locks can help reduce the costs of your home insurance cover.
Compare Insurers
Insurance companies set different prices depending on how they judge risk. Getting several quotes can help
you find the best deal.
Correct as of 24 February 2025
FAQs About Home Insurance Costs
Does a Higher Market Value Mean Higher
Insurance Costs?
Home insurance usually depends on the rebuild cost. It does not pay attention to the market
value.
How Can
I Calculate My Home’s Rebuild Cost?
You can use the Building Cost Information Service’s House Rebuilding Cost
Calculator. You can also speak with a surveyorfor assistance.
Will My
Home Insurance Cover Renovations?
Standard policies usually do not cover renovations. You should inform your insurer if you make
important changes to your home.
Why Does My Postcode Affect My Insurance Premium?
Homes in areas with higher crime rates or risks of flooding or sinking often have higher home
insurance premiums.
What
Happens If I Underinsure My Home?
If your home insurance cover is not enough, your insurer may not pay all the costs when you make
a claim. This means you will have to pay the extra amount yourself.
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