For many homeowners renewing a home insurance policy feels like a waste of money. Considering the variety of other bills you may have as a homeowner it is no small wonder people look to cut costs wherever they can.
However, you may want to understand the true cost of allowing your existing home insurance policy to renew without review, or shopping around solely for the lowest priced policy.
It is estimated that 1 in 5 UK homes are underinsured. Interestingly this risk of underinsurance is not specific to lower or higher value homes. In the case of lower-value homes, it is common for owners to use standard comparison site policies and not get the necessary level of contingencies to give full protection.
For higher value homes the declared worth of contents is usually vastly different from the true current value, especially when considering the changing values of antiques and fine art.
Being underinsured may not seem like a big deal. After all, unless your home and its contents are fully destroyed you will have some level of cover right? This couldn’t be further from the truth.
For example, if your home is valued at £200,000 and experienced water damage costing £20,000 to fix, you would need your home insurance sums insured at the correct value to claim the full amount. In this case, if your home were underinsured by half, that would leave you £10,000 out of pocket.
Incorrect home insurance doesn’t just mean underestimating property and contents values. If you don’t declare the full details of your home – quite probably unintentionally, such as security or roof structure, then a policy could be voided entirely in the event of you needing to claim.
Changes to your home, such as an extension or loft conversion often get forgotten when home insurance is concerned and can leave you at risk. That is why getting the correct home insurance is vital.
Having to make a claim on your home insurance due to damage, theft, or any other reason is among the most stressful events that you can experience. If your home isn’t correctly covered then a claim could leave life-changing implications for you and your family.
In this article, we will cover some of the essential steps to getting the right home insurance and help to ensure that you don’t end up in financial hardship because of the wrong policy.
1. What Does Home Insurance Protect Against?
Insurance policies for your home can be divided into two areas; buildings and contents. Whilst cover can be arranged by two policies covering each of the respective areas, in most cases, a combined policy is right for a homeowner.
Maintaining and updating one policy covering both buildings and contents makes things simpler when purchasing home insurance, and in the event of a claim will usually make things smoother.
What a home insurance policy covers will vary greatly. That being said, cover for all eventualities is available with certain companies. This ‘All Risk’ cover can be used to protect your home and its contents in the event of fire, theft, accidents, or events beyond your control.
While many natural disasters are often a part of standard policies, you need to be aware that your home may not be covered in all cases. For homes in the UK, that largely means flooding, which can often have an additional excess applied or be excluded altogether. And that information is often missed in the small print.
It is possible to obtain cover for homes and properties in flood-prone areas through insurance companies that work with FloodRe – but the advice is often needed in this respect.
In the event of a contents claim, insurance policies can vary in how they payout, so make sure you have the right cover to suit your needs. “New for old” is the most commonly used term by insurers. This means if an item is damaged or stolen you will get the equivalent brand new.
The alternative is an indemnity, or wear and tear. In this scenario, if your 5-year-old TV were damaged by an escape of water (not a fault with the TV itself), the insurance would pay for an equivalent of the same age and wear.
If cash is preferred, many insurance companies can offer this, but unless it is specifically written into your policy then this option may not be available.
The other area that can be somewhat confusing is the relation between car and home insurance. If your car is broken into then which policy covers any stolen possessions?
Both your home and car insurance can be adjusted to protect goods in your car while parked at your residence. Check your existing policies and make sure that you are only covered once for this, otherwise, you will be paying twice for the same cover.
2. Basic vs. Bespoke
Modern consumers often opt for basic home insurance policies, most commonly found via comparison sites. Whilst the effort involved in getting cover is just a few clicks, the extent of cover is often unclear. In addition, many policies found on these kinds of sites are sold to you on their most basic cover.
Once you reach the end of the process the up-sell starts for the add-ons. Some of these may be covered as standard by other policies – particularly those not found on comparison sites.
Opting for bespoke home insurance takes the fear of being underinsured and all but removes it. Whilst the process takes a little longer than many will be used to, there are numerous advantages to having an insurance expert help you find cover.
Firstly, your personal situation, type of home, and extent of contents can all be discussed in detail with a real person as opposed to ticking an online form. Having another person in your corner also means keeping your insurance updated and accurate isn’t just down to you.
A great insurance provider will get in touch with you personally on renewal to fully understand any changes required to your cover.
3. Correctly Valuing Your Possessions & Home
When an insurer asks you to provide information on your contents, getting the facts right can be hard. Living at home we can often underestimate the true value of all our possessions, or misunderstand what contents cover includes.
Your contents aren’t just about the items you enjoy using but spreads to aspects like carpets and even your kitchen equipment. It is best to go room to room and write down everything you have and a value to replace.
There are many online content calculators that can help with this exercise, but it is worth seeking advice from an expert broker as not all of these tools will cover the full range of possessions or fit your home.
For example, if you have outbuildings or an annex you would need to include the items stored there too, as well as specialist sporting equipment.
If you are living with family, don’t discount the children’s belongings either. With many children now boasting smartphones and games consoles, the sum of their paraphernalia could total thousands.
For students at university, most policies will provide cover for their belongings whilst away – but not all. Again, this is worth checking, particularly if they valuable or expensive items with them.
When it comes to your most prized possessions, you will often need to declare these as high-value single items. Failure to declare high-value jewelry, watches, artwork, and even furniture can leave them underinsured or worse still – not covered at all. Furthermore, adding these just once to a long-standing policy is not enough. I
n the case of valuable items, the monetary value will often change over time. As the value of your treasured possessions changes and you don’t update your insurance cover, you are likely to find yourself underinsured.
Contents are not the only thing that can be left underinsured. The building itself can easily be insured for the wrong amount. Many people think that the amount of cover required is the same as the property value or mortgage amount.
This is not the case and can be a costly mistake. For insurance purposes, the value needs to reflect the cost of reinstating the building of your home from scratch.
There are many factors that affect rebuilding sums insured, including age, type of construction, whether it is a listed building, location, refurbishments, and extensions that have been carried out. Add to that the fluctuations in the cost of building materials and professional fees, such as architects and surveyors, and it is very easy to become underinsured.
You must also declare any building works being carried out before they start to make sure you are covered during an extension or renovation.
Once completed, a further review of your insurance cover is essential – particularly if you have added extra bedrooms and your policy is calculated on a bedroom-rated basis.
The addition of an extension may also change other aspects of your home insurance such as increased content value so that is vital to bear in mind.
4. Understand What Incorrect Decelerations Can Do
While misunderstanding your contents can leave you out of pocket, making incorrect declarations on your policy can leave you entirely without cover in the event of a claim.
The foundation of insurance is an agreement between you and the insurer. By providing incorrect information – even if by genuine mistake, you void that agreement. This can happen even without your knowledge.
Home insurance policies often vary in terms of the requirement for certain types of lock or security devices being installed. Although many basic policies don’t now ask for specific details of your home security, not checking the small print can leave you out of pocket in the event of a claim. If you have high-value items, then the situation can be very different from insurance providers requiring a specific level of security to be in place.
Make sure you fully understand the value of your home and triple check insurance policies to ensure the information is all present and correct. As well as security, you will often be asked to make declarations on how flat your roof is, if you are close to the water and if you have a large tree within a certain distance of your home.
If you are confused, then consult with an expert insurance broker. They will be able to explain terminology and help find the answers to your questions. Failing to do so could be extremely costly, so it’s worth getting your policy accurate.
5. Get The Add-ons You Need
When running through the gauntlet of comparison sites it is all too common to get fixated on one thing; the total policy cost. When it comes to home insurance, this can leave you dangerously under-protected in the event of a claim. Often people are unaware of just how inflexible their cover is until the need to claim.
When opting for a more bespoke policy you can be assured that the cover will be tailored to you. As such these insurance policies don’t have ‘add-ons’- they are created with your exact requirements in mind and as such will be one overall premium that covers all your needs. A great broker will also be able to find niche areas of cover that may be relevant to you.
For example, home cyber insurance is becoming increasingly vital for consumers. Cyber protection can help protect from hackers on your home network, and from devastating financial and lifestyle consequences should they access your online banking or personal information.
And whilst we are living with the COVID-19 pandemic, more and more of us are continuing to work from home. Some policies were updated to extend cover to home working in terms of computer equipment etc.
However, you should check whether this cover is still being provided if you are continuing to work from home. Furthermore, if you have business visitors to your home, that presents a risk that is unlikely to be covered as standard.
When using comparison sites it is important to understand what each of the most common add-ons is, and if they apply to your needs. A few of the most add-ons for basic policies are:
i. Home Emergency Cover
When time is of the essence it is great to have this protection. Home emergency helps cover the costs related to urgent repairs, this can include call-out fees and the cost of parts.
Many insurance providers will provide you with a helpline, or an approved list of trusted tradesmen should something go wrong. Incidents covered are usually defined as being a health risk, causing damage to your home or leaving your home unsafe. This could include blocked drainage systems, burst pipes, and electrical failure.
ii. Legal Assistance
While cover for the rebuilding of your home and its contents are covered in a home insurance policy, this does not spread to legal costs. If a visitor was to make a claim against something that happened on your property then you could be held liable.
This could be something as innocuous as someone slipping and falling in your garden. If the argument can be made that it happened as a result of your negligence then you could end up paying compensation and legal costs.
The situations in which you could use this cover vary greatly and will depend on the provider in question, so it’s essential to understand any limitations prior to undertaking this cover.
iii. Alternative Accommodation
This cover can be vital for homeowners, especially families who could be displaced in the event that your home becomes unsafe to live in – for example, in the event of a flood or fire.
If you have children or are in a situation where living with extended family wouldn’t be an option in the event you could no longer use your home, then alternative accommodation is likely a must-have.
While a standard policy will likely cover any repairs or rebuilding that must take place, the insurance does not always provide you with somewhere to live in the meantime. The time span for works to be completed could be months and could leave you seriously out of pocket. As such it is best to consider what you would do if you couldn’t live in your home.
6. Time Spent Getting Covered Is Time Well Spent
Hopefully, these tips have shed some light on how you should approach your next home insurance quote or renewal. While undertaking more work to get a policy can seem like unnecessary stress, just imagine the stress of having your insurance payout too little or not at all!
If you think you could use a bit more help getting the correct home insurance then we would encourage you to look for an insurance broker who can help. Getting a real person on your side to understand your needs can be a game-changer, and help put the odds in your favor.
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Roz is a Private Client Director and specializes in High-Value Home Insurance, Fine Art, and Antiques. Over the years Roz has gained experience in placing non-standard risks, including Flood areas, Subsidence, and Unusual Buildings, etc. and has developed relationships with specialist insurers who she can call upon as situations require.