7 expert tips on choosing a good home insurance deal
Home insurance might seem a fairly straight-forward process.
But, with so many possible options and policy variations, it can be a case of save cash now, but lose out in the future.
In other words, when you're choosing home insurance, don't just sign up to the cheapest policy on the market without making sure it's the right one for you.
There are two types of home insurance cover –
Buildings and Contents.
But where does one end and the other start?
There’s an old claims assessor’s trick that still works, if you’re confused about what is contents and what counts as buildings.
Imagine being able to pick your entire home up and tip it upside down.
Whatever stays in place is ‘buildings’, everything else that falls to the floor is ‘contents.’
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Building insurance is designed, in the most extreme case, to rebuild your home.
Keep in mind that the cost of this is almost certainly much less than the market value of your home.
If you own your own home, you would be very unwise not to insure the building because, after all, this is more than a home, it’s also an asset, very likely your most valuable one.
If you're a tenant, the landlord would normally take care of buildings insurance; similarly, if you own a flat that’s part of a block, and you don’t own the freehold, it’s highly likely that buildings insurance will be included in any maintenance charge.
There are several levels of contents cover and there are lots of options, too. Such things as accidental cover (that's when you spill red wine over your brand-new cream carpet!).
There are also things like excess to consider – the amount the insurer will take off before settling a claim. If you go for a higher excess, you'll generally get a lower quot. But, if you claim, you'll get less from the insurer.
Some people choose not to insure their contents, perhaps taking the view they don’t have much of significant monetary value.
But it's worth adding things up. Just because you don't have valuable items, that doesn't mean that added together your contents don't add up to a fair bit.
Imagine a catastrophic event, like a fire. Now imagine you are left with nothing. That's when the value of contents insurance is really apparent.
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Here are SEVEN tips for ensuring you have the right cover...
Don’t assume you're covered
It sounds straightforward to know what is covered by your insurance, but it’s surprising how many people simply don’t know.
So, don’t assume something is covered. Check it is.
This applies especially to contents – do you know, for example, if your possessions are covered when you're away from home?
On a standard policy, probably not.
Is accidental damage covered?
What’s the limit for a claim on a single item?
Do you have a single valuable item that needs listing separately, or even a separate, specialist policy? A separate, specialist policy might be worthwhile for a musical instrument, for example, camera, or sports equipment.
What about cover for possessions when overseas, or travelling? What about things in your garden, or in a garden shed?
This golden rule is the simplest – ask before you buy, so you are clear what's covered.
There’s a good chance you’ll be surprised to find things you had assumed were insured actually aren’t.
Make sure you compare – and watch out for the mortgage sales trap
No-one these days should be going to an insurer direct and asking for cover without comparing the price and policy with the rest of the market.
Using a comparison tool is an essential part of the selection process.
The market is no longer one big mystery that only a specialist broker could unravel for you. You can get plenty of information to help you make informed decisions.
And watch out for the mortgage lender who tries to upsell insurance to you.
This is a common scam – and it's a scam because there is zero interest in getting you a good deal.
Lots of mortgage lenders – banks and building societies – will try and sell you insurance to go along with your mortgage because having buildings cover, at least, will be a condition of your loan (they want to protect the asset they are funding).
But don’t be pressured – there’s nothing to say you have to take up their offer and you’re free to check out the market for the best deal. In fact, you'd be nuts not to!
You will have to prove to your lender, though, that you’ve got buildings insurance.
Get your numbers right
Make sure you know the worth of things to avoid disappointment.
And, in the case of the cost of rebuilding your home, avoiding absolute disaster!
Finding you have not insured your home to cover rebuilding could leave you in dire financial straits.
Similarly, consider your contents carefully and add up the cost of replacement and arrive at a realistic figure. Many people are surprised at the high value of all that they have accumulated.
Many insurers use a standard £500,000 figure as the rebuild cost of a house.
And they will use this to calculate your premium, even though you may not need anything like this level of cover.
If you know the real figure, you may be able to get a better deal as a result.
Watch out for premium inflation
In our experience, insurers are generally only too willing to punish you with unfair annual rises in the cost of premiums. Don't let them!
Every time you get a renewal notice for insurance, do a comparison.
These days they have to let you know what last year’s premium was, so you can see the increase.
We suggest always working out what the percentage rise is and then challenging them on this as it will almost always be way, way above inflation.
If you haven’t claimed in the last 12 months, ask them how they justify this.
They’ll always have an answer, right now it'll be to do with insurance tax and changes in government rules. But don’t stand for any blah blah – if it sounds like nonsense, it almost certainly is!
Do a comparison and see what else is on the market.
Don’t under insure
It's vital you don’t under insure.
There is a lot of misunderstanding about this. Many people think it’s OK to under-declare the overall worth of something in order to lower their premium.
“My contents are worth, say, £40,000, but I’ll just insure them for £10,000 as I’d be happy to get that amount if I lost the lot, and the premium will be a lot cheaper.”
NO! It doesn't work like that!
If you're under-insured overall by that much (in this case 75%), then every claim could potentially be lowered by that amount, however small, or big, it is.
So, under-insuring could be disastrous in the event of a claim.
Record your possessions by videoing and photographing them and keep as many purchase receipts as possible because you may be asked for proof of purchase in the event of a claim.
Remember, too, to take reasonable care of higher-value items as the insurer will expect this. If you're careless or negligent, this could make them decide a loss was partly (or completely) your fault, in which case they won't pay.
Ask for extra cover if you need it
You don’t have to stick to bog-standard policies.
Many insurers will consider add ons and extras.
Have a think about what would give you peace of mind to insure.
How about the contents of your freezer, or garden furniture, emergency help for burst pipes, legal cover, or even the consequences of identity theft?
If these appeal, it’s worth asking.
Think carefully before you claim
Of course, insurance is there to be used when you need it, and that means claiming.
But it’s worth considering whether it’s really worth making a claim.
Think about two things – how much above your excess if the claim worth, and how much effect a claim will have on a renewal premium.
It’s nearly always the case that a claim will mean your premium (with any company) will be higher the next time around because a claim makes you statistically more likely to claim again, so your risk profile increases.
Some people take the view that insurance should only be for catastrophic or pretty serious events only; others will claim whatever the event.
The decision is yours, but claiming will have an affect on your premium. It will send it up!
When did you last switch your home insurance provider?
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