How High to Set a Home Insurance Excess

Anyone who has shopped around for home insurance recently may have noticed an interesting trend - with the excess (deductible) offered by home insurance providers gradually creeping north.

The excess is the amount that the insured person pays in the event of a claim. So for example, if you had a £100 excess and made a successful claim for £1,000 after an insured event, you would pay the initial £100 with the insurer covering the remaining £900.

Why are excess levels increasing?

According to financial analyst Defaqto, the number of firms with a £100 excess on home insurance policies rose by seven per cent in the last 12 months. Indeed a number of insurers have even increased their standard policy excess to £200. Though some providers offer the opportunity to reduce the standard excess, this is generally only done in return for higher premiums.

There is also a new trend emerging in which insurers impose higher excesses for certain risks - for example, claims relating to the escape of water often require a £250 excess.

There are several reasons why this is occurring. One is that insurers want to limit their exposure and reduce the number of small claims that are made.

Secondly, consumers are now becoming more accepting of higher excesses. The gradual increases have become commonplace and many consumers even overlook the policy excess altogether in a bid to find a cheaper deal.

Why you shouldn't overlook the excess

When buying an insurance policy it's easy to simply look at the price of the policy, but the excess level is crucial too. Finding up to £250 at one time to cover an insured loss could be difficult and wipe out the purpose of cover for many events you are supposed to be insured for.

Remember you don't have to set the excess high to secure a cheap premium. Boosting the security of your home, fitting smoke detectors and paying annually instead of monthly can all help reduce your premiums.

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