Now's the time to find cheap home cover

Competition in the home insurance market has been hotting up over the summer - to the extent that there has never been a better time to shop around for significantly cheaper cover.

This week, ING Direct announced it is entering the buildings and contents market. The Dutch-owned bank is promising low quotes - it claims as little as £200 for a standard home - and is aiming at those who already have one of its savings accounts. However, our snapshot test (see below) found it relatively pricey for a London home.

It faces tough competition from HSBC, which this week became the latest bank to offer to undercut a renewal quote by £60, while offering to match the level of cover. There have already been similar deals from Barclays, Lloyds and Nationwide. Last month, Tesco ran a half-price sale - although that has now ended. It all means anyone renewing their home insurance without shopping around is missing out on an easy opportunity to save money.

As burglary rates have fallen significantly over the past decade, a large number of companies have opted to enter the home insurance market. Increased competition has kept prices down, despite the rising incidents of flooding and other extreme weather.

The AA recently reported that home premiums have barely risen since it started measuring them in 1994. Kevin Sinclair, managing director of AA Insurance, says: "Home premiums have shown little movement, although there is serious industry concern about the longer-term implications of global warming. But the industry has become very sophisticated in the way it identifies risk, using tools such as flood mapping and analysis of local crime levels to pinpoint the areas most at risk."

The challenge

To test ING Direct, we ran a price comparison among the companies known to be offering the keenest prices. We asked our chosen insurers to quote to cover a three-bedroom flat in south London. Our family of four wanted basic home and contents insurance without many of the add-ons that insurers now sell. To broaden the search, we also used the comparison websites confused.com and insure supermarket.com - and we compared the prices to the renewal quote from Halifax, the property's current insurer.

We found ING's price to be double that of the cheapest, Halifax, although it could have been because the ING computer didn't like our postcode. The £200 quote it provided was for a house in Redhill, Surrey.

According to our investigations, Halifax Home Insurance remains the company to go to first for a quote. The Yorkshire firm has hoovered up lots of customers over the past 12-18 months by offering some fantastic prices - some customers have more than halved what they were paying to cover their house.

So how do you get the cheapest prices?

All insurers are now so desperate to get customers to buy cover online that the savings for those on the internet are massive. It is not uncommon for the price to be 20% cheaper - and in some cases up to half price. If you don't have web access, ring up and say the system crashed during a quote, and they will probably offer the same price as online.

To save time inputting the same details several times over, websites such as insuresupermarket.com and confused.com will check several sites at once, although in our experience they don't tend to work as well for home insurance as they do for car.

ING's website is easy to use and it's worth getting a quote as the company is new, and keen to build a customer base. More Th>n should be added to the list, as should Liverpool Victoria.

Tesco, which started off with low prices, has become more expensive over recent years. However, it often comes up with promotions that can bring down the price dramatically.

When checking quotes, see whether it includes cover for possessions outside the home and legal expenses. The former can offer excellent value for money if it allows you to scrap other policies covering mobile phones or cycles. Parents can often cover their offspring's possessions while at college in this way. If you require neither, take them off the policy and watch the premium fall.

Finally, if you already have what you think is a very low price, head to one of the banks or building societies at renewal time. As HSBC launched this week, it will often offer to undercut a renewal by a certain amount (usually £50-£60) and match or better the cover provided. If that's the best deal on offer for you, take it now - just remember to shop around in 12 months' time.

Price test

Quotes based on a three-bedroom flat in London SE21, for basic cover with an excess of £100. Rates will vary markedly across the UK.

Buildings

Halifax:unlimited

Liverpool Victoria: £500,000

Tesco:£1m

AA:£300,000

ING Direct:£250,000

Contents

Halifax:£50,000

Liverpool Victoria:£125,000

Tesco: £50,000

AA: £50,000

ING Direct:£50,000

APR

Halifax: 0%

Liverpool Victoria:12.5%

Tesco:16.9%

AA:24.9%

ING Direct: 0%

Premium

Halifaxunlimited: £288

Liverpool Victoria: £442

Tesco: £560

AA:£649

ING Direct: £720

· HSBC will offer to undercut renewal quotes by £60.