Home-owners shop around for insurance

increasing numbers of inquiries from policyholders shopping around for

cheaper quotes. This trend is expected to continue as further premium

increases are announced. In response, insurers are also starting to

offer lower-cost alternatives.

There can be wide differences nowadays in the price of insuring the

same building and its contents between one insurer and another.

Previously the main variations were with contents insurance, but since

the introduction of postcode ratings for buildings insurance the

anomalies have increased.

It is estimated that around two-thirds of home-owners currently insure

their buildings through insurance companies suggested by their mortgage

lenders even though they are not obliged to do so. Many borrowers still

appear unaware that they are free to choose their own insurer, or that

they can make significant cost savings if they do. A lender may charge a

#25 administration fee if you switch insurance, but this should be more

than covered by the lower premiums you will have to pay.

A further 25% of borrowers also insure their household contents

through their lenders. This proportion is undoubtedly higher among

recent home-buyers who are often given extra mortgage discounts

initially if they agree to take out combined contents and buildings

policies.

On the building side, insurers have now divided the UK into between

five and 10 cost categories to reflect the risk of claim. Fortunately

most of Scotland has escaped the swingeing increases in premiums

experienced in other parts of the UK, particularly in south-east England

where rises of over 100% have occurred to cover the extra risk of

subsidence.

The majority of Scottish homes fall into the insurers' lowest risk

categories. But even so the pricing can vary between around #16 and #20

for every #10,000 insured and some insurers are now prepared to give

further discounts. A recent innovation is the introduction of no claims

discount.

The latest company to launch a no claims discount on home buildings

insurance is Provincial. It will give a 10% introductory discount to

home-owners who have been insured for the last three years and not made

a claim. There is a further 2.5% discount if you have a smoke-detector

which increases to 5% if you also have a fire-extinguisher or

fire-blanket in the house. Together these discounts can bring the cost

of cover down to under #14 per #10,000 of insurance. So, on a #75,000

property you could achieve savings of nearly #50 a year and bring your

premium down to #102.60.

Provincial's marketing communication officer, Tony Hogan, says: ''Many

insurers argue that no claims bonuses are inappropriate for home

building insurance because the home-owner has no control over bad

weather and the damage it causes, unlike motor insurance where no claims

bonuses are seen as a positive encouragement to motorists to drive more

carefully.

''However, we believe there are various ways that home-owners can help

to prevent claims arising and think they should be rewarded for doing

so. The Scots should benefit particularly as we find they are generally

better at maintaining their properties because they are used to more

extreme weather conditions.''

Under Provincial's policy, the no claims bonus rises to 20% on renewal

if no claim is made. Further discounts are also available if you agree

to an increase excess above the standard #50. An excess of #100 for

example entitles you to another 5% reduction in premiums.

No claims discounts on buildings insurance are still relatively rare.

Other insurers which offer them include the AA and Zurich Insurance.

Discounts are a more common feature of household contents insurance

policies but this hasn't stopped premiums rocketing in Scotland. Norwich

Union points out that cover for a typical three-bedroom home in the

Glasgow area would have cost just #8 in 1973; by 1983 it had risen to

#60, while this year the price stands at #242.50.

Insurers blame the increases on the mounting costs of claims,

particularly as a result of theft. Well over half the cases of

housebreaking recorded by the police in Scotland occur in the

Strathclyde area, though there was a slight fall last year. Fife,

Grampian, and Tayside, however, all saw an increase in the number of

burglaries.

Another reason for the increase in premiums, though, has been the

improved cover provided. For example, nearly all insurers now sell only

''new for old'' policies which means they have to pay the full cost of

say a new piece of furniture if it gets damaged even though you may have

had it for 20 years.

In order to provide a lower cost alternative for those struggling to

afford current premiums, Norwich Union has therefore decided to

reintroduce an old-style ''indemnity'' home contents insurance policy

called ''Essentials''. Instead of replacing new for old it will be

giving policyholders enough to replace damaged or stolen items on a

''like for like'' basis. The cost of a typical three-bedroom home in

Glasgow under this policy would fall to #155.90.

The best way to check out which company is offering the best deal for

your home and its contents is to ask a local broker or ring one of the

telephone quotation services such as the AA, Lloyds Bank, or Direct

Line.