The new build insurance postcode lottery

Why buying a new build home could mean you face higher premiums.

As house-buying season ramps up, even in this fluctuating marketing, new build homes are becoming increasingly popular. With a range of alluring financial incentives such as ‘we pay your stamp duty’ or ‘pay no mortgage for a year’, new builds can be an enticing option.

However, with the excitement of a new home comes a question: why is it that, often, new home buyers are reporting lofty premiums? The answer isn’t what you think it is…

What’s the appeal of a new build home?

Getting onto the property ladder is a real achievement – especially when you consider how much harder it is nowadays. Saving for a large enough deposit is the biggest challenge: it currently takes the average first-time buyer 21 years to build up a deposit if they save 5% of their income, according to the Resolution Foundation. In the early 1990s, it took four years.

That’s why the various financial aid schemes for first-time buyers or shared ownership can align well with new builds. Developers may offer Deposit Unlock, or lower mortgage rates through the Own New Rate Reducer scheme. They may also pay your Stamp Duty, which is an attractive offer and potentially a big saving for buyers.

Another benefit is the prospect of having no chain, or a much smaller one if you are selling your current property. For some, even part-exchanging their home for a new one can be a huge win, preventing the chain scenario entirely.

Further advantages include the design of the home, both practically and aesthetically. New builds are a blank canvas, with no renovations needed before you can live comfortably and to your own taste! What’s more, new homes can be up to four times more energy-efficient, as they are built with the latest energy-saving building materials and smart technology. Many achieve the highest EPC ratings of A or B. With energy prices as they have been, this can make a huge difference when it comes to managing household bills.

Insuring a new build home

With modern building techniques and security features, it seems logical that new builds would be less costly to insure. But this isn’t always the case.

You need to have home insurance to complete your property purchase. But when you buy a new build, you could find your quote request rejected by insurers. Why? It could all come down to your postcode – or rather ‘lack’ of postcode.

The main problem is often that brand new postcodes, created when developers build new estates, are often not on insurers’ systems yet. Your postcode is a crucial piece of the puzzle that insurers use to determine your risk profile, and ultimately calculate your premium. But with no postcode to infer information from, insurers will default to the ‘high risk’ end of the spectrum for your home, to protect their risk – or simply refuse to quote.

Steve Aldous, Branch Manager at Howden Carterton, explained: “We’ve had several new estates appear in recent years in our community, much like other parts of the UK. I fear many residents just don’t know that they could be paying more than they deserve to, just because of an admin discrepancy.

“Insurers take many things into account when calculating your premium, and the postcode is a crucial key because it reveals so much about your property; from the flood risk to local crime rates. But with nothing to go on, as is often the case for new builds, insurers can deem your home high risk.

“If you’re entering your details online on an insurance website, you could either find yourself ‘no-quoted’, leaving you with the stress of finding someone that will insure you, or with a much higher premium than you truly need. Even an extra £10 or £20 a month ‘higher’ could equate to hundreds being unduly spent on a high-risk premium when your home isn’t truly in this category.”

How can new build buyers save on their home insurance?

Is it possible to fix this disproportionate insurance profile as a new build homeowner?

Well, you would need to contact your builder, and the Royal Mail to check that your postcode is registered. Then, you’d need to find an insurer that has updated their systems and therefore has your address on file.

Sounds like a headache? That’s because it is one, and especially something you don’t need when you’re already stressed trying to buy a property.

A simpler option then, is to use an insurance broker.

Steve continued: “Buying a home and moving is already stressful enough; who wants the hassle of chasing up developers and the Royal Mail, all with the fear that you’re not properly covered while you wait? We can go directly to insurers to provide them the information they need to update their databases, to ensure your new build isn’t misrepresented as high-risk.

“As a broker, we do the legwork. Our job is to act as an advocate for you with insurers, to get you the best value premium, and communicate the nuances and specifics of your circumstances.”

An insurance broker, such as Howden, can also help you find the right policy for you, looking at your new build’s rebuild value, to ensure you’re not underinsured and in the lurch if things go wrong. With access to a wider range of insurance deals that aren’t always advertised to consumers directly, a broker can use its established relationships with insurers to obtain better deals than if you were sorting your cover alone.

Moving to a new build? Talk to your local branch team

If you’re considering a move, or are in the process of buying a new-build home, speak to your local Howden team. Our friendly insurance experts are on-hand to help you get value for money on your cover.

Pop into your local branch for a chat, a cup of tea, and cover that suits you. We’re always happy to see you!

Sources: MoneySavingExpert, HOA, Rightmove

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