Unemployment: an added insurance risk

Confused.com has warned that unemployed people in the UK could end up paying more for their home insurance. With unemployment in the UK at its highest for over a decade, many will be unaware of the knock-on effects the situation can have on other household finances that reach beyond the loss of earnings.

When carrying out risk assessments for home insurance premiums, insurance providers take many factors into consideration. One being the employment status of the homeowner. The main factor taken into consideration by insurance providers is the likelihood of defaulting on payments. As household budgets become stretched, payment of monthly premiums could be overlooked as other responsibilities such as mortgages are prioritised. This is a risk to an insurance provider and is therefore likely to be reflected in the price of the premium.

Some may think that prices may be lowered as the home is occupied during the day, reducing the risk of burglary. The truth however, is an insurance provider perceives the likelihood of accidental damage occurring is far greater as the home is occupied at all times, thus affecting a premium. As homes have people in them all the time, accidents such as spillages, fire and escape of water is more likely to happen. This presumption could be particularly truthful, for those who are making cuts by taking out their children from nurseries. As a result, the home is occupied by little people requiring entertainment. This could result in a claim for accidental damage as they make their own fun.

Darren Black, head of home insurance at Confused.com said: ‘With so many people out of work, Britain's homes are under serious financial pressure. It may come as a surprise to many people that unemployment means pricier premiums. However, with the house occupied for longer periods of time, by more people, it is realistic for providers to perceive higher risks associated with this. It is paramount that the importance of paying premiums is not overlooked. As soon as you miss a payment, the policy is in jeopardy which could mean disaster should a major event such as flood or fire affect a home. Taking a chance, and leaving your home uninsured is very dangerous for those already strapped for cash as a result of being out of work.'

Those who are unemployed need to call their providers and notify them of the change of circumstances. Many insurance providers will change premiums, but such a change will be applied at the renewal stage. It is unlikely you will see an immediate change in the policy.

For those looking to save money, price comparison sites such as Confused.com can do this for you. With the ability to look at the best deals on the market, for the best price, homeowners can save hundreds of pounds when obtaining an array of financial products including home insurance.