Home Insurance – How to choose the right cover

Sainsbury’s Finance magazine “Spring Ideas” arrived in my letter box a few days ago.

There is an interesting article on making sure that your property is fully protected. It is full of useful tips and advice illustrated below. The article reminds us about the floods of 2007 that could easily happen again and that there are currently more than 1.7 million UK homeowners without buildings insurance and one in four households has no contents insurance. Many of those who do have contents insurance underestimate the value of what they own by an average £9,000!

Naturally when money is tight as it in the present climate, it can be tempting to cut costs on insurance. Malcolm Tarling of the ABI (The Association of British Insurers) has reminded consumers that by underinsuring could have serious consequences as you would not have enough money to replace belongings.

The article with the ABI’s input lists four main points to consider:

1: Chose the policy on the level of cover it provides – not just on price. The cheapest option can be false economy.. Read the policy carefully before you buy so you know exactly what you’re covered for and what exclusions apply.

2: Make sure the sum insured is adequate for your needs. This will be the most the insurer will pay out if everything you own is totally destroyed so it will be up to you to make sure its is enough. For buildings it should be the full cost of rebuilding your home and of course remember this is not the same as market value. You can use the ABI’s online calculator to work out the right sum (Visit abii.bcis.co.uk).

Alternatively for total peace of mind consider choosing a policy that offers unlimited buildings cover. When arranging contents, the sum should be enough to replace all the possessions inside your home form carpets and clothes to TV’s audiovisual equipment to kitchen appliances. The ABI say that as a guide the average home currently has around £38,000 worth of contents, however to work out the amount for an individual home, you need to list all your own belongings – quite a task. The ABI have produced a leaflet entitled “Is your Home Underinsured” and you can download this at (abi.org.uk)

3: Consider whether you need extra cover. Ask yourself whether you should pay an additional premium for accidental damage cover. Check the exclusions carefully as not all policies will cover mishaps such as damage to soft furnishings or damaged caused by botched DIY or pets. Also consider whether you need to add personal belongings cover to protect expensive items like jewellery, laptops and mobile phones when they are not at your home.

4: Shop around for the best deal. Malcolm Tarling of the ABI says that different insurers specialize in different risks, so you will need to look at the options from insurance brokers to online and high street insurance providers so that you make sure you get the right cover at the right price. He also goes on to remind the consumer that some insurers may charge extra if you want to spread the cost of payments and pay monthly. He also says that you shouldn’t be afraid to switch providers, because even if your policy is not due for renewal for a few months, if you find the right offer it can pay to switch early.

After these very interesting points provided by the ABI the Sainsbury’s Finance “Spring Ideas” article provided a very useful “Policy checklist”

Remember that the cheapest quote doesn’t always offer the most comprehensive cover: check policy exclusions and excesses carefully.
Check the sums insured to make sure they’re adequate for your needs.
Check whether the policy offers new for old cover, or makes a deduction for wear and tear.
Check single item limits and whether you can cover high-value items.
Consider whether you need optional extras, such as extended accidental damage cover.
Check whether the policy offers an automatic seasonal increase in contents cover over the Christmas period.
Check whether the policy offers a no claims discount – and if so how it works and whether you can protect it.
Check whether there is an extra charge if you want to pay by monthly direct debit.
Finally check whether there’s a discount if you buy combined buildings and contents cover.

That is a very good aide memoir for anyone looking for home insurance. I was interested to see the point about checking about “a no claims discount” Karen Preston who is Head of Customer Development stated in her “Welcome” on page 3 that “Have you ever wondered why no-claims discounts are the norm for car insurance – but not when you buy home insurance? In fact one in four home insurance policies fails to offer a no-claims discount, which means customers are missing out on potentially huge savings. What’s more, of those insurers who do offer a discount, 74% provide no details on how it works, making it difficult for customers to understand their position.

Sainsbury’s thinks this is unfair and has issued a challenge to other providers to make their policies on no-claims discounts less confusing”

It will be interesting to know how they get on and what type of reaction they get. No doubt in organization like the ABI or British Insurance Brokers' Association (BIBA) get involved on behalf of the industry there will be more weight for such a campaign

Whatever you don’t forget to take out your property insurance whether you are an owner occupier, or renting or letting. Insurance is one essential you can’t afford to be without today.