Risks and pricing of home insurance

Insurance companies use risk-based pricing to determine what premium you should pay for your home insurance. They look at a whole range of factors when setting your premium including your personal details, the location and postcode of the property, the construction of the walls and roof, the rebuild cost and what security measures are in place.

Why is security important to my insurance company?

Increasing the security on your property will be looked upon favourably by insurance companies as it lowers your risk of making a claim. As such, many insurance companies will offer a discount on your premium if you have a well secured home. Security measures that may result in a discount include:

• A professionally fitted and maintained burglar alarm system
• Membership of an approved Neighbourhood Watch Scheme
• Approved security locks on windows and doors

Some property owners may live in areas that insurance companies consider high risk, such as city centres, and therefore may insist on certain security measures being in place before providing cover.

Some insurance companies or brokers will be able to provide you with a list of measures you can take to make your property more secure, and as a result help you to get a cheaper quote.

In the event of a claim your insurance policy can help put things right, but it cannot compensate for the upset and inconvenience. Take all the precautions you can to prevent the worst from happening.

What is subsidence and what should I look out for?

Subsidence occurs when there is a downward movement of the ground that supports a building. It can happen for a number of reasons such as a property being built on clay soil, trees taking the moisture out of the soil surrounding a property, water leaks that wash away the soil beneath a building's foundations and landslip.

Insurance policies usually cover subsidence but you should check your policy terms and conditions to see if there are any limitations on your cover. Your insurance company will want to know as soon as you suspect you may have a subsidence problem so we have put together some information to help you identify any issues.

The first obvious sign of subsidence is the appearance of cracks. However, not all cracks indicate that there is a problem. Most buildings shift and settle at some time and there is no need to be alarmed by every crack that appears.

Cracks are common in new properties and newly built extensions. They are likely to be the result of the building settling under its own weight. These are usually nothing to worry about, nor are fine cracks that often appear in newly plastered walls. Buildings shrink and swell naturally due to changes in temperature and humidity, which can lead to minor cracks where walls and ceilings meet. These too are not normally anything to worry about.

What should be looked out for are small, usually diagonal, cracks which suddenly appear in plaster work inside and outside bricks at weak points, such as around doors and windows, especially after long periods of dry weather. These may, but not necessarily, indicate movement in the building's foundations. The cracks will normally be thicker than a 10p coin, and usually be wider at the top. Doors and windows may also 'stick' due to the distortion of the building.

You should expect your insurance company to send out someone to inspect your property if you tell them you think you have subsidence.

For information relating to flooding, see our separate section flooding and home insurance.

So how do I get the right home insurance for my needs?

The best way to find the right home insurance cover is to shop around, and what easier way to do it than using a comparison site like Gocompare.com which allows you to compare quotes and cover from a large number of insurance companies?

Staying with your current insurance company when your policy is due for renewal may seem to be the simplest and convenient option but it may not be the cheapest as many companies offer competitive prices and discounts for new business.

Typical discounts include:

• An introductory discount for new customers
• A no claims discount if you have a number of claim free years
• A discount for purchasing your buildings and contents insurance policies together

Insurance companies will also assess your level of risk and you may qualify for extra discounts if you:

• Live in a neighbourhood watch area
• Live in a property that has a burglar alarm
• The property has approved locks fitted to external doors and windows

Is there any reason why I shouldn't just accept the cheapest quote?

The cheapest quote may not provide the right level of cover for your needs, meaning that while you may save money on your premium you could be left out of pocket later on if you do need to make a claim. By paying a little extra for your insurance it is usually possible to secure better cover and therefore get better value for money.

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