What Does the Future of Home Insurance Cover Look Like?
The housing market is in constant flux, with many different aspects having an impact on things like availability, house prices, mortgage rates and insurance. And when it comes to home insurance itself, the landscape has changed over the past few years and continues to develop. So what areas have seen the largest changes, and what can we expect to see in the future of home insurance cover?
House Price Increases
Although this is something that’s been a constant in the housing market for close to 20 years, house prices have continued to rise at a fast rate. According to the UK House Price Index, the average property price in the UK was just over £178,000 in January 2014, and just under £285,000 in November 2023, an increase of 59.9%. However, from January 2023, house prices have slightly fallen by approximately 0.28%. Despite the recent levelling out, the recent rises – also coupled with increases in mortgage level rates – price increases have a big impact on home insurance policies.
The biggest risk facing homeowners is underinsurance. When you take out a home insurance policy, it will have been insured to the level of the house’s price at the time. If you don’t look to regularly update your policy to the right level of cover, you will be underinsured on your home. So if something does go wrong such as damage from a storm, the payout you’ll receive won’t be enough to cover the cost of repairs. You can avoid underinsurance by working with an insurance broker like [broker_name] who can identify areas of underinsurance and ensure your policy is up-to-date.
In addition to underinsurance, with house prices slightly falling in 2023 and a further dip predicted in 2024, you should also be cautious of overinsurance, where you’re paying too much in relation to your house’s value.
Material Costs
Something that saw an increase in the COVID-19 pandemic and also a hit during the outbreak of the war in Ukraine, was the cost of materials. With many industries in lockdown or working at a reduced capacity, the scarcity of materials increased prices, especially when demand didn’t dwindle.
Material costs have also been impacted by inflation, which has increased the prices of materials used to build and repair homes. The impact this has had on insurance means that premiums would increase to adequately cover the costs of repairs. As well as materials, labour costs have also increased in recent years, with workers looking for pay rises to at least match inflation increases and to combat cost of living fears.
With the main shipping route from the Far East to Europe under threat from Houthi rebels in Yemen, and many ships seeking to use the longer Cape of Good Hope route around Africa, this will only bring uncertainty and delays to international shipping, which could have a further impact on material costs and the insurance policies that depend on them.
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Flood Risks
This winter, we’ve seen a number of different floods hit the UK as a result of storms and heavy downpours. This has led to an increase in homes and businesses being flooded, which can have far-reaching short, medium and long-term impacts.
When it comes to home insurance premiums, the increased risk of flooding can affect your policy. Also if you’ve had to make a claim on flooding then this will have also affected your cover for the future. And even if you’ve not been affected, being in a flood plain or an area at risk of an increased risk of flooding, then you may have to pay more for the correct protection from floods.
Many properties would have flood protection included in their policy, but if you find premiums are too high because you live in an at-risk area, cover can be available without insurance for flooding. However, this comes at the big risk of having no protection at all if a flood does strike your property.
With a larger insurance company, you’re likely to be given an off-the-shelf policy that may not give you the best cover in the right areas. However, by working with an insurance broker like [broker_name], we can work with you to create a tailored policy that perfectly suits the unique nature of your home, its price and the situation it’s in.
