Postcodes and home insurance

Where you live has a direct effect on your home insurance premium.  Insurers rate your address based on the likelihood of you making a claim.

This risk rating will make your buildings and contents insurance more or less expensive depending on your chances of being burgled or your home suffering from disasters such as flooding, subsidence or heave.

The cheapest postcodes are Bournemouth and York while north Londoners live in the most expensive area in Britain for home insurance according to research by Moneysupermarket.com.

This year those living in Surrey – particularly Dorking – and the Scottish cities of Edinburgh and Glasgow have been hit by huge hikes in insurance premiums of up to 46%.

The credit crunch which has led to more burglaries and global warming giving rise to extreme weather conditions causing severe damage to homes have been blamed for the rise in costly claims. The other excuse given by insurers is that fraudulent claims have increased, though if they knew they were fraud presumably they didn't pay them out.

What pushes up your premium?

Insurers analyse the claims history of their customers and use the postcode to assess a number of risk factors.

• Living in a crime ridden area is an obvious one.
• An expensive area will also often increase the cost as the value of the property and its contents are generally more than the average – so they'll cost more to repair or replace.
• Homes that are on flood plains or in areas that have experienced severe flooding in recent years will be hit by higher premiums
• Areas where there have been several claims for subsidence or heave are expensive too.
• Guilt by association - naughty neighbours who put in fraudulent claims will make your premiums higher too.

What can you do about it?

Obviously, it's not simple to move home – though the cost of insurance is something you could take into account when buying a new home.

The first step is to shop around and not just accept the quotes you are given.  Comparing prices can save the average homeowner around £130 a year on their insurance. The reason costs vary widely is that insurers don't all use the same postcode map when assessing areas for crime or flooding, for instance. Some insurers have extremely detailed postcode data which means they can narrow down those homes most likely to put in claims to just a few streets.  Those that use broader postcodes on which to base the premiums will catch far more homes than may be necessary.

Improving your home security and joining a Neighbourhood Watch scheme will help keep the lid on rising premiums. Homeinsurance.co.uk has a comprehensive guide on security.

Many insurers now offer no-claims discounts similar to those available to drivers with motor insurance, so don’t put in claims for minor disasters. Consider covering the cost yourself for minor repairs and replacements when your belongings have been damaged. And take precautions to limit the chance of a claim by preventing burst  water pipes in winter and keeping your home repairs up to date.

Give up smoking and fit a smoke alarm. Insurers charge smokers more because of the extra risk of fire.

And finally look at your policy closely. Make sure you're not over-insuring your contents, increase the first part of any claim that you pay (the excess) and check whether you can remove any expensive optional extras such as accidental damage.