SEVEN home insurance pitfalls and how to avoid them
Buying home insurance can be a minefield.
And it’s mainly because of the way some insurers have decided to treat their customers.
At A Spokesman Said we’ve highlighted case after case of people either being ripped off by automatic renewals, badly treated when they make a claim or being sold cover they don’t need.
The best thing to do is compare home insurance prices and find yourself a good deal.
So, here's what we've learnt that may help you get the right insurance for the right price.
1) Overpaying – Use comparison tools
These days anyone who doesn’t go online and use a comparison tool to get the best price for the most suitable policy is crazy.
Don't worry about personal service and old fashioned courtesies when visiting a broker or heading to your High Street bank. That's aut as up to date as black and white television.
The days of choosing insurance by taking someone else’s word about the best deal for you are dead.
The industry knows this, and you will not do yourself any favours if you buy from someone or a company that doesn’t offer products from the whole market.
If you still believe you'll get the best deals by being loyal to an insurance company, we're here to tell you that this is a lie.
In fact, it's worse than that. We have countless examples of customers being ripped off for being loyal. Here's one.
2) Contents and Buildings cover – are you sure you're clear on the difference?
Be absolutely clear about what you’re insuring.
The first thing is to understand is the difference between what is covered by buildings insurance and what is covered by contents.
Here’s what is traditionally taught to insurance sales people.
Imagine taking a house (or flat) in your hand and flipping it upside down.
* Anything that falls out of place is ‘contents’.
* Anything that stays put is ‘buildings’.
It’s a rule of thumb that for the most part still applies – but of course you should always check the specifics with your provider.
3) Don't rush to claim – it may leave you out of pocket
Always do the maths before making a claim.
And we’re not just talking about the excess on a policy here – although you do need to take that into account.
Obviously, if your excess is £100 and you have some contents damage amounting to £80, there would be no point in claiming.
But, in fact, if you had an excess of £100, you might be surprised to find that it's still not worth claiming if the damage is twice, even three times, that amount.
Talk to most underwriters and they’ll probably tell you that the number one thing you can do to keep your premium in check is NOT TO CLAIM.
This might seem like a strange piece of advice. That's what insurance is there for, after all.
But, in the longer run, it can save you money if you keep your ‘no-claims’ status.
Claims add to premiums
Make a claim and your provider is going to take this into account at renewal time, and bump up your premium.
And any new provider will also know you made a claim and take this into account when quoting. They'll know, by the way, even if you choose not to tell them because the claim will be filed in a database all insurance companies have access to.
The frequency of claims is one of the key indicators underwriters look at when assessing risk and the price of a policy.
There are others things, too, of course, like where you live, your age, and so on. But the claims one is a biggie.
And, perhaps surprisingly, the frequency of claims is even more important than the size of claim.
Multiple claims indicate what the industry calls a ‘moral hazard’, perhaps that a householder is careless, doesn’t maintain their property, or take adequate security safeguards. It might seem unfair, but there it is.
Of course, the whole point of insurance is to cover you if you suffer loss, so if your loss is significant, no one would suggest not claiming.
But keep in mind that it's worth assessing carefully whether a claim is really worth it.
4) Being under-insured – often misunderstood
Under insurance is widely misunderstood and this lack of knowledge can come with a heavy price.
It’s easy to under-estimate your building’s and especially your content’s worth.
But it really is worth spending some time to make sure you have arrived at a reasonable figure. Otherwise, this can cost you in a way that surprises many people.
If you don’t insure for a reasonable figure, you are ignoring what the industry calls the ‘condition of average’. You’ll need to see the policy wording to see if this is present.
But what it means is, for example, that if your entire contents insurance cover is deemed to be, let’s say, 50% less than it should be, then this percentage deduction will be applied to smaller claims.
It works like this.
* You break a chair. The breakage is covered in your policy, and it will cost £100 to replace. You make a claim.
* Your insurance provider decides when you put in a claim that your contents insurance cover overall is for 50% less than its real worth.
* You may only get a cheque for £50 because you’re 50% under-insured.
When disaster strikes - it's important you know what you have covered
5) Not understanding what to disclose – here’s how to know
When you complete your policy application there will always be a lot of questions that you'll need to answer.
Then there’s always a supplementary catch-all one saying something along the lines of ‘tell us about anything else we should know’.
How can you answer that if you don’t know specifically what they need to know?
It seems unfair because you’ll also be warned that if you don’t tell them something that’s material (even if they haven’t asked you about that something) they may not pay out if you claim.
Top Tip: The golden rule about deciding what to tell your insurance company is: if in doubt, tell them.
Yes, it might affect your premium, but it will also show you are conscientious and it will also, more importantly, ensure your policy is valid.
Be careful to answer all those questions about your house accurately, because if you make a claim and an assessor calls, they may well make comparisons.
Things like saying a roof is tiled when it’s actually felt, do matter. If it’s a genuine misunderstanding, then it probably won’t matter, but it’s best not to be complacent. It's important to remember: you may have to prove it was a genuine misunderstanding, so pay attention to detail and make sure that the info is correct first time. And if you don't know something, say you don't know.
6) Failing to comply with your policy – read the Ts&Cs
This is so important and yet so often not done. Once the policy document comes through the letterbox, many people just put it aside.
There will almost certainly be terms and conditions attached to any policy – perhaps the type of alarm system that must be fitted to a property, or other security conditions, types of locks on doors maybe.
Whatever the terms and conditions, please do observe them to avoid nasty shocks, ie finding out your cover is not valid when you make a claim.
7) Jumping at the cheapest policy on offer – don’t!
The cheapest quote you get may be a policy that’s right for you and it may meet your insurance needs.
Or there may be a very costly price to pay in the future.
If it’s really cheap in comparison to lots of other quotes, there must be a reason.
Generally it’s in the small print. The golden rule is: check.
Also, there’s a common misconception that all insurance is equal and it’s just the cost and sum insured that’s different.
Have a look online for complaints about a company and reviews and for articles on sites like A Spokesman Said.
Obviously all big companies are going to attract complaints, so finding a few cases of people who are not happy, or a few bad reviews, should not necessarily put you off.
But ask yourself if there’s a pattern. If there’s a long list of similar complaints, it might be best to give the company a miss, even if the price is attractive.