Cost of car and home insurance drops as cost of living increases

8 min Read Published: 12 May 2022

The cost of car and home insurance drops in 2022

The cost of home and car insurance has fallen by 7% and 5% respectively in the first quarter of 2022, according to the Association of British Insurers (ABI). The findings come from the ABI's Household and Motor Insurance premium trackers that look at the amount consumers actually pay for their insurance policies rather than the amount they are quoted.

In January 2022 the Financial Conduct Authority (FCA) implemented new rules that meant car and home insurance providers could not charge existing customers more than new customers. While it may be too soon to tell if the new regulations have had an impact on the drop in prices, there has been a change in the premium cost for new and existing car insurance customers, which we share below.

The drop in the insurance policies may be a welcome relief to some as, due to inflation, the cost of living continues to increase, leaving many households struggling to pay household bills. In this article, we share some tips on how to save money on your car and home insurance. For more information on how to save money on other bills, read our article 'How to save money on your household bills'.

The average cost of car insurance

The average car insurance policy in the first quarter of 2022 was £416, which is a 5% drop compared to the average policy in the respective quarter of 2021 and is the lowest since the latter part of 2015. Whilst the average policy cost was £416, there was a difference between policy costs for new and returning customers. New customers paid an average of £105 more than those renewing their policy, with new policies increasing by an average of £34. Renewed policies fell by £55, however, bringing the average cost for a renewed car insurance policy down to £375.

Despite the drop in the cost of car insurance policies in early 2022, the motoring industry is seeing an increase in costs elsewhere, with a shortage of skilled repair labourers and an increase in repair costs and used-car prices.

The average cost of home insurance

Home insurance also saw a significant drop in the cost of policies since 2021 and separate buildings and contents policies are at the lowest recorded average since the first ABI recorded data in 2012. In the first quarter of 2022, the average price for a buildings insurance policy was £225 and the average price for a contents insurance policy was £114. For a combined buildings and contents policy, the average premium was £307, which is its lowest in the last 4 years, with a 2% drop.

How to get the best deal on car and home insurance

If your car or home insurance policy is up for renewal, follow these tips to try and save some money and get the best deal:

Shop around

Shopping around is one of the best ways to ensure that you are getting the best deal on your insurance policy as it allows you to compare quotes from various insurers across the market. Comparison sites can be an easy way to compare multiple insurers at once, but not all insurers are listed so you could be missing out on better prices.

Shopping around is also beneficial when it comes to renewing your policy as it can be tempting to stay with your existing provider, but this may not always be the best quote. One thing to remember when shopping around, however, is that the cheapest insurance policy is not always the best, so ensure you read the policy terms carefully and have selected the right amount of cover.

Check your policy excess

How much you pay as an excess on your policy can affect the policy cost. Typically the higher the policy excess, the lower the insurance premium. When choosing a policy excess you need to remember that this is the amount payable when making a claim and therefore need to ensure it is an affordable amount.

Only insure what you need

When taking out car and home insurance look carefully at the amount of cover you are insuring yourself for. Are you over-insuring yourself? You may already have cover for optional extras on car insurance, such as breakdown cover or lost-key cover, on other insurance policies or package accounts. You may also be able to cut back on optional extras on your home insurance policy too, such as accidental damage cover or insurance for expensive gadgets taken outside of your home.

Protect your no claims

Not claiming on your car and home insurance policy could save money over time as not claiming on a policy is seen as lower risk. If you have to make a claim this usually has to be declared when taking out or renewing a policy and you may see a jump in your insurance premiums. As a result, having no claims may mean you are offered a discount on a new or renewed policy, particularly with car insurance where you can pay to protect your no claims bonus.

Pay for your insurance annually

Did you know that paying for your insurance policy annually can actually save you money? It does mean that you will need to pay for the policy cost up front, but it can save you money in the long run. Damien explains more in the following video.

How to buy cheap car and home insurance

One of the quickest and easiest ways to compare car and home insurance is via a comparison site such as MoneySuperMarket*, Confused.com* or GoCompare*. Comparison sites allow you to compare multiple providers at once to find some of the best deals on the market. Not all comparison sites are whole of market though, so you may get a better deal elsewhere. Because of this, it is also recommended that you compare quotes with more than one comparison site to find the cheapest deal. Additionally, some insurers such as Direct Line are not on comparison sites, so in some cases you could be getting a better deal direct with an insurer.

The cheapest policy doesn't always mean the best, so ensure you check your policy carefully and that it meets your cover requirements.

 

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