Insurers are now warning that spending cuts may increase the cost of home insurance and could even prevent some homeowners from protecting their homes from floods. Confused.com’s Stephen Jones explains...
We all know that times are tough. Chancellor George Osborne told us as much in his very first Budget speech, as he committed to reducing the country’s financial black hole by billions more than had been anticipated at the election.
While we all might expect hikes in taxes or cuts in spending to affect us in one way or another, we may not have considered the less direct ways in which we could suffer – with one of these being the cost of insuring our homes.
Last week, the Association of British Insurers (ABI) warned that home insurance premiums could soar should the government cut back on spending for flood defences in the coming years. Insurers have already suffered a staggeringly expensive few years due to widespread flooding, and without government support, it’s feared that the cost of premiums could well rise in turn.
At present, 1 in 6 homes in England and Wales is at risk of flooding. The ABI predicts that this frightening ratio will only get worse as sea levels rise due to global warming, which in turn would mean greater cost passed on to consumers. Indeed, according to association’s own figures, a rise in temperature of just two degrees could potentially push the price of insurance up by 16 per cent.
On top of this, the ABI is also concerned that too many new homes are being built in flood plains against the advice of the Environment Agency. While the industry is currently committed to providing flood insurance as widely as possible until at least 2013, it may be that this cannot continue unless the state does something to deal with these combined problems.
In the past week, £2 million of government money was put forward for councils in flood-prone areas, but it’s likely that a good deal more will be needed to tackle what is an increasing cause of concern for UK homeowners. The only difficulty is, with schools and hospitals among those competing for Treasury affections, where will that money come from?
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