The cost of repairing the structure of your property or replacing your valuable contents can often cause distress so it is essential to protect your home.
There are two main types of home insurance cover: buildings insurance and contents insurance.
Buildings insurance covers the actual permanent structures of the home as well as any land you may own. This not only includes the outside structure of your home, but may also cover some permanent fittings within it, too, such as toilets, baths sinks and even fitted kitchens. It's worth checking to make sure exactly what is covered by your policy in order to avoid any problems at a later stage. Buildings insurance may also cover out buildings, garages, outside walls and fences.
Mortgage lenders, if they are financing the purchase of your new property, will usually insist that you have arranged a suitable buildings insurance policy in advance, in order to protect their own interest in the property.
Your mortgage lender (or broker) might offer you buildings insurance when you arrange your mortgage. While it might be convenient to arrange it at the same time, it might not be the most competitive deal, so shop around. You should always get at least three quotations, because costs vary widely from one insurer to the next.
What will your buildings insurance insure you against?
Most building insurance policies will insure you against the following:
- Falling objects from aircraft
- Storms and bad weather
- Falling trees and branches
- Impact from vehicles
The risk assessment that determines the cost of your policy will be influenced by where in the country you live. For example, if you live in a high flood risk area, you should expect to pay a slightly higher premium.
Failing to disclose the correct information about the state of the property might result in the insurance company not paying out in the event of a problem, so be as accurate and as honest as you can. You should also make sure you know what the insurance will not cover. For example, if you cause major damage to the structure of the property while undertaking home improvements, you may not be covered.
What is not likely to be covered?
Your buildings insurance is unlikely to cover you against the following:
- Radioactive contamination
- Pressure waves from an aircraft.
Some specialist insurers may insure you against events not included in standard policies, so make sure you check with each insurer. In some cases you may be able to bolt-on extras for an additional cost. This might include securing alternative accommodation should your home become uninhabitable due to an unforeseen event. Check out the options available. It's worth it in the long term.
With almost every insurance policy, you will need to specify the excess you're willing to pay. This is the contribution you will make to the repairs, should you need to make a claim. The value of the excess will impact the amount you pay in premiums, but avoid just picking the highest excess value to reduce your monthly premiums and make sure you are comfortable with the amount of excess you agree to in the event of a claim.
While buildings insurance is mandatory if you are using a mortgage to fund a house purchase, contents insurance is at the discretion of the owner. However, it would be foolhardy to neglect this type of insurance.
Collectively, the contents of your property will probably add up to a sizeable sum and you should take the necessary precautions to protect yourself. Contents insurance is designed to protect items that are not part of the fabric of your home, including:
- Entertainment equipment, such as TVs, hi-fis and computers
- Furniture, such as sofas
- Books and CDs
- Curtains and carpets
Even some items that reside outside of your home or that you may carry on your person may be covered, including:
- Gardening equipment
- The contents of your wallet, briefcase or handbag
- Luggage when travelling abroad
However, you should make sure you understand exactly what is covered so you can be confident everything is suitably protected.
The most common events you should cover your contents against are:
In the event that you lose your keys, some insurers include cover for the cost of replacing locks on your property, but check to see if this is included or not. If you have very expensive individual items in your property, such as antiques, expensive jewellery and paintings, you should consider getting specialist insurance to make sure you're adequately covered, as some standard insurers may limit the amount they will insure certain items for.
The excess value is the amount you will need to contribute in the event of making a claim. In some cases, the item damaged might be worth less than the excess you pay, so you may want to replace the item yourself to avoid making a claim and impacting any no-claims bonus you have built up.
Some policies offer a new-for-old replacement service for lost or damaged items. Essentially, the insurer will replace any item with a brand new one. Although your premium might be a little higher if you choose this option, it could be well worth it should the unthinkable occur.
Are you adequately insured?
Many of us are under-insured and when it comes to making a claim, you may find you've not got enough cover, particularly if you've not reviewed your policy for a number of years.
Make a note of all your household possessions, attribute an accurate and up-to-date value to them and produce an informed estimate for your insurer. Try to take out as much of the guess work as possible to avoid any shortfall. It's better to be over-insured than under-insured. You may find you have to pay a little more in premiums, but it is well worth doing so if it means you are well protected.
Getting the best deal on your insurance
Shop around. Compare at least three house insurance quotes and weigh up what you are getting against the cost of each policy. There are numerous price comparison websites around that will search the whole market for you in a matter of minutes and even allow you to apply there and then.
Many insurers offer generous discounts if you buy your buildings and contents policies together. You'll often get cheaper house insurance quotes if you decide to apply online.
Remember, while trying to save money is always sensible, it is more important that you make sure you are adequately insured. Try not to cut corners on your cover just to save a few pounds, as it might not be worth it in the long run.
Premium contents insurance
The issue of high net worth individuals being under-insured is a serious problem and is almost entirely down to product unsuitability. Many of these individuals are unaware that premium insurance is available, while others simply don't class themselves as wealthy enough to think that they might require premium cover.
Many standard policies may not offer sufficient sums for your contents, while others do not cover works of art or antiques. In addition, it is perfectly normal for standard insurers to limit the amount they will pay out on specific items, including high value jewellery, in the event of loss, theft or damage.
There is a tendency to believe that premium insurance is significantly more expensive than standard cover. However, premium insurance can often be cheaper than mainstream policies because the expert valuation allows a premium insurer to be more accurate in its assessment of the property, its contents and the associated risk profile rather than a 'one-size-fits-all' mainstream insurer.
So how can you find out if you are under-insured and whether you would benefit by switching to a specialist high value insurer?
Get regular professional valuations of your home contents and make sure your home insurance policy keeps pace so that it adequately covers not only instances of a single or partial loss following a burglary or theft, but will also be sufficient should you suffer the misfortune of your house being destroyed by fire.
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