Do cheap home insurance deals offer real value?

While many home insurance providers might be offering heavily discounted products at the moment it still makes sense to shop around, writes Emma Lunn.

A price war has broken out in the home insurance market with a number of leading insurers slashing prices and offering headline-grabbing discounts in an attempt to lure new customers.

But are these deals really the best on offer?

Essentially, home insurance covers your home and its contents against a range of events that could result in the loss or damage to possessions or affect your ability to use your home. It can also protect you against liability for accidents that occur in your home.

Home insurance is split into two main categories; buildings (which covers the structure of your property) and contents (your possessions). Buildings insurance is mandatory if you have a mortgage but contents cover is optional, albeit advisable. You can either buy two separate policies or a joint policy for both buildings and contents.

Last month’s storms generated more than 20,000 insurance claims and highlight the importance of having adequate cover in place.

Sean Gardner, chief executive of price comparison website MoneyExpert.com, says: “The good news when it comes to home insurance is that prices have hardly changed over the past 15 years. Back in 1995 the average policy cost £209 and today it’s just £215. Although this isn’t to say that you shouldn’t still be on the look out for the best deal possible.

“Insurers tend to entice customers in with big discounts, particularly online. Until recently Tesco were offering a hefty 50 per cent off another policy when you took out your contents and buildings insurance with them.”

Until May 26th Sainsbury’s Bank is offering new customers 12 months home insurance cover for the price of nine, and a further 10 per cent discount if you buy the policy online. The offer is available to people purchasing both buildings and contents cover together.

Neil Laird, home insurance manager at Sainsbury’s, says: “Home insurance policies vary dramatically so its essential people compare policies not only on price but also on the level of cover they provide. Quality cover such as unlimited buildings insurance doesn't have to be expensive and although premiums have been rising, by shopping around and taking advantage of discounts such as ours, there are significant savings to be made.”

But rival insurer More Than says the Sainsbury’s offer is nothing more than a “short-lived, headline-grabbing promotion.”

More Than product manager Keith Maxwell says the offer effectively gives customers 25 per cent discount for joint buildings and contents cover, with an extra 10 per cent off for buying online. But only those fortunate enough to buy before 26th May will be able to benefit, and as the offer is only applicable in the first year customer loyalty is not rewarded.

He says: “More Than seeks to attract new customers with great offers but also reward their loyalty every year through new initiatives such as free contents cover for life - worth an average £100 per year. It also offers a 20 per cent discount when the customer buys over the phone or 25 per cent when they buy online. Existing More Than customers are also rewarded for their loyalty through a range of exclusive discounts at a number of leading high street retailers.”

Meanwhile Nationwide Building Society and Direct Line are both offering a third off premiums at the moment if customers buy contents and buildings cover together, while Churchill is offering up to 35 per cent off premiums for new customers buying a policy online.

Essentially, the best way to make sure you are getting the best deal on your insurance is to compare both the level of cover and the price you will pay, taking into account any discounts. Shopping around is crucial as insurers vary in how much they charge and what for. Internet comparison sites can often help people find the best – and cheapest - policy for their needs.

Experts say it is important not to just accept your renewal quote without question. In most cases you will be able to get cheaper cover by shopping around and making use of discounts offered to new customers elsewhere.

Other factors to look out for include whether a contents policy includes accidental damage or cover for personal possessions – such as mobile phones or mp3 players - taken outside of the home. Some policies also include legal expenses cover which covers the legal costs of various scenarios including claiming compensation from someone, fighting unfair dismissal from your job or disputes with neighbours.

If possible it is best to pay your home insurance policy as a lump sum upfront as many insurers will charge you extra if you choose to pay for the policy by direct debit.

“So if you plan to pay this way then chose a provider like Nationwide who do not charge an additional fee,” says Gardner, “The buck stops with the consumer however to make sure you get the right deal for you. Check that you’re happy with the policy you’re being offered before signing on the dotted line.”