How are my premiums calculated?

Have you ever wondered how your home insurance premiums are calculated? We explain the reasons why the price can sometimes fluctuate.

You might have noticed that the cost of home insurance premiums can rise and fall. For example, in Q4 of 2025 the average building and contents insurance cost £379. While this is £14 lower than the previous year, it is higher than in 2022, when the average policyholder was paying £305. This changeable rate is due to several different factors which determine the cost of your premiums.

You and your home

When you take out a policy, your insurer will ask for information about you and your property to ascertain the level of cover you need. Where you live will be taken into consideration – the insurer will assess the chance of you making a claim in your area and look at the average cost of any previous claims in your neighbourhood.

The build of your property can affect the price – for example, there is a heightened fire risk if it has been constructed with timber frames, so your insurance may be more expensive. Or, if your home is made from unusual materials, this will increase the rebuild cost, so your premiums might rise accordingly.

Your insurer will ask if you have made any previous claims. If the answer is yes, they may assess that the chances of making a payout are higher, therefore your price will go up. Despite this, it is vital you answer this question truthfully – if you have withheld information, you risk invalidating a claim, which will cost you more in the long run.

External factors

It is not just your personal details that will affect the price of insurance. When you pay a premium, the money goes into a central pot that the insurer uses to make payouts to any of its customers. Therefore, if the insurer has an influx in claims, they may need to increase their premiums for new customers to be able to make all their payouts. Periods of severe weather can therefore be costly for everyone, even if your home hasn’t been directly affected by a storm.

Inflation will also influence the amount that insurers charge. Rising energy costs and supply chain disruptions have an impact on the repair costs – in turn, this will cause the average claim to rise, which will ultimately filter through to your premium price.

Seek professional advice

If your home insurance is coming up for renewal, it’s important to check your policy still meets your needs. Professional advisers can source products that aren’t available on price comparison sites. Talk to us to ensure you have the right level of cover.

As with all insurance policies, conditions and exclusions will apply

Sources:

https://www.aviva.co.uk/insurance/home-products/home-insurance/knowledge-centre/your-home-price-explained/

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