When unemployment rises, home insurance does too

When the credit crunch hit back in 2007, the traditional concept of a ‘nice safe job in a bank’ – or any role in finance for that matter – became questionable. And when investment bank Lehman Brothers went bankrupt, ‘a nice safe job in a bank’ ceased to exist entirely.

Even as a financial journalist, where the tools of my trade are more words than pound and pence, I remember feeling particularly unsettled and insecure about the future.

There are two reasons why I wanted to mention this in my blog. First off, at least I knew that in the event I was made redundant from my job, I had Accident, Sickness and Unemployment insurance to save me. This would pay my salary for up to 12 months and I was pretty confident I would find other work during this time – whether I liked the new job or not. Thankfully my role remained intact but it’s staggering how many people I know with debts, bills, mortgages and even young families, who live without this or any other contingency plan – effectively, by the seat of their pants. After all, for the price of a couple of rounds of drinks, they could buy a basic insurance policy that would see them right should their income suddenly disappear.

The second point is more likely to be something you didn’t know. In the event you are made unemployed, the cost of your home insurance is likely to go up – this is according to research carried out by comparison site, Confused.com.

Even if I say it myself, I thought I knew all there was to know about insurance – so this surprised me! It was my impression that home insurance premiums would actually fall if you spent more time within your bricks and mortar as burglary would be a lot less likely. But apparently insurers don’t see it like that. Not only will they factor into their premium the risk that you may be unable to keep up your monthly payments, but the chances of accidental damage – a far more common claim than burglary – are also higher for the simple fact you are spending longer in the home. All this translates into a higher premium when you come to renew your deal.

I thought this nugget of information illustrated just how complex insurers’ ‘behind-the-scenes’ calculations can be when it comes to working out premiums for any insurance. But while there is often little you can do about the price you are quoted in an honest application (which of course is crucially important) at least us consumers now have the power to shop around. Not only does this enable us to pay the cheapest price for the same cover, but it keeps insurers on their toes too – and that can only be a good thing.

Make sure you compare plenty of quotes before taking the plunge – it’ll pay off in the end. So, the moral of this story is shop around and have a contingency plan in place to save home insurance premiums from kicking you while you’re down.