Here is a rare piece of good news for households watching their outgoings. After two years of steep increases, home insurance premiums are expected to come down in 2026. According to analysis from EY, the average policy is forecast to fall by around 3% this year, bringing the typical cost to roughly £320, down from £330 in 2025.
A cheaper renewal quote is welcome at a time when very little else seems to be getting cheaper. The fuller picture is more complicated, though, and it is worth understanding what is going on beneath that headline number before you make any decisions about your cover.
Why premiums are coming down
The drop is not happening because insuring a home has become less risky or less expensive. It is happening because the market has become more competitive. After a period of rate rises designed to catch up with inflation, insurers are now keeping prices low to hold onto customers and win new business. The trade press has covered the forecast in detail. Insurance Times reported that competitive pressure is the main driver, with some insurers expected to keep premiums deliberately low to build volume and market share.
Why insurers are worried
Here is the part that does not make the headlines. EY forecasts that the UK home insurance market will move back into loss-making territory in 2026, with a net combined ratio of 103%, as Insurance Age reported. In plain terms, that means insurers are expected to pay out around £1.03 in claims and costs for every £1 they take in premiums. That follows a brief return to profit in 2025.
The reason is that while premiums are falling, the cost of actually settling claims keeps climbing. EY found that although the number of claims has dropped by 36% in recent years, the total amount paid out by UK insurers has more than doubled, rising 126% since 2020. The drivers are higher costs for building materials, labour and specialist repair work. A single subsidence or escape-of-water claim costs far more to put right today than it did five years ago.
So the industry finds itself in an awkward position. Premiums are being held down by competition at the same time as claims costs are rising. That gap has to close somewhere, and history suggests it tends to close through premium rises in later years, or through tighter terms and conditions in the meantime.
What a cheaper premium can sometimes hide
A lower price is genuinely good news when the cover behind it is sound. The risk is assuming that the cheapest quote and the right policy are always the same thing. When insurers are competing hard on price, a few things are worth checking before you switch on cost alone.
Sum insured and rebuild cost. With building and repair costs having risen sharply since 2020, a rebuild figure that looked right a few years ago may now leave you underinsured. If your sum insured has not kept pace, a cheaper premium could simply reflect a policy that would not fully cover you after a serious claim.
Excess levels. A lower premium sometimes comes with a higher excess. It is worth knowing what you would actually pay out of pocket if you needed to claim, particularly for things like subsidence or escape of water.
Exclusions and conditions. Competitive policies can carry conditions that are easy to miss, such as requirements around how long a property can be left unoccupied, or specific security measures. These matter most at exactly the moment you need to claim.
Claims service. Price tells you nothing about what happens when something goes wrong. The experience of making a claim, and having someone accessible to help you through it, is where the real value of insurance sits.
The case for advice over autopilot
Falling premiums are a good prompt to review your home insurance properly. A review is a chance to check that your rebuild cost is accurate, that your contents are properly valued, and that the cover matches how you actually live in and use your home.
This is where a broker earns their keep. A good broker looks at the whole picture, explains what the cover does and does not include, and makes sure the policy would respond properly if you ever had to rely on it. When the market is moving, that clarity is worth having.
If you would like a review of your home insurance ahead of your next renewal, please get in touch. A lower premium is worth having, and it is worth making sure it is the right one.
