Cost of home insurance drops from 2024 peak

The average home insurance policy covering both buildings and contents cost £384 in the third quarter of 2025. This marks a decrease of £23 (roughly 6%) from the £407 peak recorded in the same period of 2024, signaling a relief for households after years of sharp increases.

The data from the Association of British Insurers (ABI) correlates with separate research by NimbleFins, which reflects this softening market, with robust buildings and contents cover now costing £461 on average (down from £489). Basic home insurance policies have also become more affordable, with average starting prices dropping to £356, compared to £377 a year earlier.

Insurers in the UK paid out a record £4.6 billion in property insurance claims during the first nine months of 2025, marking a £155 million (3%) increase over the same period in 2024.

This surge was fueled by a significant third quarter where payouts approached £1.5 billion. If this pace continues, 2025 is projected to become the highest-paying year on record for the insurance industry.

Adverse weather remains a primary driver of these rising costs, with climate-related damage totaling £936 million, £143 million more than the same period in 2024 and just over a fifth (21%) of the total £4.6 billion paid out in claims

Specifically, damage to personal homes and belongings from severe weather reached £596 million, representing a 21% year-on-year increase. Industry leaders suggest these figures highlight an urgent need to prioritize climate resilience in both new and existing housing developments.

The rising cost of labour and parts has also seen insurers sound a word of caution.

Mark Shepherd, Head of General Insurance Policy at the ABI said in November 2025:

“Building resilience into new homes is essential if we’re to manage the growing risks posed by climate change. But resilience isn’t exclusive to new builds. As extreme weather becomes more frequent, existing homeowners also need to know how to protect what they already have. That’s why we’ve updated our flooding and storm guidance to provide clear, actionable advice that helps people prepare their homes, understand their insurance, and feel more confident navigating the claims process when bad weather strikes."

Homes with a lower rebuild cost are typically cheaper to insure. When NimbleFins compared the same type of house with different rebuild estimates, it found the average cost of home insurance to be as low as £361 for a comprehensive policy with a £120,000 rebuild cost, compared to £509 if it was estimated to cost £1,000,000 to rebuild the property.

NimbleFins previously reported nearly one in four home insurance claims are rejected , with experts suggesting some people do not know what they are signing up for.

While some insurers were found to accept 95-100% of claims, the worst providers were found to pay out on just 55-60%, the Financial Conduct Authority found.

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