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Your home insurance price explained

The cost of your home insurance is affected by lots of different factors – some unique to you, and others that are a result of the world around you. It’s also based on the likelihood of you having to make a claim.

If you do make a claim, we pay for it out of the central pot that all of our customers pay into. If lots of people claim at once, that pot has to go further – which means prices go up. But whatever happens, we constantly review the way we calculate the cost of home insurance so that we can make sure you get the best price.

How you affect your price

There are numerous factors specific to you that we use in calculating your price.

How the world around you affects your price

Many factors influence insurance prices, in addition to your personal details.

Price breakdown

In 2016, the average home insurance price increased. We’ve broken this down to help explain what makes up the average price:

  • 74% = Claims costs – the amount Aviva pays out in claims
  • 13% = Operating & marketing costs such as contact centres and online support
  • 11% = Insurance Premium Tax
  • 2% = The profit that Aviva makes

As you can see, claims make up the biggest part of the average price so here’s a breakdown of the cost of home insurance claims:

  • 36% = Water leaks
  • 6% = Storm
  • 17% = Theft including burglaries
  • 14% = Fire
  • 13% = Accidental Damage e.g dropping a tin of paint on the carpet
  • 6% = Flood
  • 1% = Freeze/frozen pipes
  • 3% = Subsidence
  • 5% = Other

Source: Calculations based on 2016 Aviva direct home insurance policies.

Number of bathrooms

‘Escape of water’ is one of the biggest types of household claims. More bathrooms mean more pipework. More pipework means a greater chance of something going wrong – it is also more difficult and costly to trace where an escape of water originates from within your home.

Where you live

We rate each postcode and address individually and this will reflect the price you pay. Several factors are taken into consideration including the average claims costs together with the future claims we expect to see in your area. Increased claims will mean that it may cost more to insure your home in particular areas.

How secure is your home

An alarm doesn’t always lead to a lower price; even if it’s a condition of your cover. So, depending on the crime levels where you live or if you want to insure your home for a large sum; we may ask about alarms and locks, but this might not result in any further reductions in the price.

How busy is your home

Someone’s in during the day

Being at home more during the day might put you at a lower risk of theft. However, it does mean there’s more chance of other claims, such as accidental loss or damage, fire, or plumbing problems – which could increase your price.

Household numbers

The number of people living in your house has a big impact on prices, as more people means more belongings and more potential claims.

Your previous claims

To generate your price we take in to consideration your claims history which includes accidents, claims and or losses in the last five years.

Type of building

We assess detached, semi and terraced houses differently, just as we do flats and other types of homes. There are lots of reasons why. For example, terraced houses suffer less subsidence, so may cost less to insure than a semi-detached one in a high risk subsidence area, regardless of its size or value.

Building materials

The way your property’s been built is likely to affect your price. Mainly, it comes down to the fire risk. As a result, timber framed and thatched properties will see higher prices based on their potential fire risk.

Severe weather

We all know how extreme weather can affect the UK. Prolonged periods of cold weather or rain can damage homes – most often resulting in burst pipes. However, it’s flooding claims that have really risen over the past few decades and, like other insurers, we regularly review the likelihood of future claims resulting from it. To help people within flood regions the government has worked with the entire insurance industry to make sure people who live within flood areas can get their homes insured. We’re very much part of that push to make sure everyone can enjoy the protection they need. This has resulted in the initiative Flood Re.

Repair costs have gone up

From TVs to tablets, state-of-the-art kitchens to lighting, the products in your home are getting ever-more expensive. Naturally, it’s also getting more expensive to fix them, which increases the cost of providing insurance and the price you pay.

Change in the nature of claims in the market

If the variety of claims we receive changes, our customers’ prices will also change. For example, leaking pipe claims averaged £2,500 in 2015. If that figure went up or down, it’s likely home insurance prices would too. We estimate how much we’re likely to pay in future claims, and incorporate this cost into customers’ prices. Escape of water makes up a large part of your premium.

Number of claims

We settle thousands of claims each month. If the number of claims increases, for example due to extreme weather events, such as floods, this might increase our costs – and could lead to higher prices. We’re very open about our customers’ claims experience, and in October 2013 we became the first UK insurer to publish our customers’ claims ratings and reviews on our website (Average 4.6 out of 5 as at 1 Frebruary 2017 for buying and claiming from us). It is worth considering this when choosing your insurer.

Insurance Premium Tax (IPT) increase

Every price includes a contribution towards administrative and running costs, such as staff and buildings, as well as Insurance Premium Tax (IPT). Last year the Government announced an increase in IPT from 9.5% to 10% from October 2016, so all prices rose to allow for this increase. The Government also announced within the Autumn 2016 budget a further 2% increase from 10% to 12% which will be implemented in June 2017.

Other costs

Customers can access our products in a number of different ways and the price they pay will include some costs which go towards providing the services available, such as contact centres or online support, as well as investing in future products and services.

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