Insurance: Home Insurance

There's no such thing as a standard home insurance policy. Each insurer offers varying levels of cover and different exclusions. However, they make it a little easier to compare by dividing home insurance into two sections, buildings and contents, which you can buy separately or together...

Buildings insurance

So you're a homeowner are you? That mock-Tudor gothic pile in Elmwood Close, off Treewood Drive, off Golf-course way? Well, your name is on the mortgage, but the deeds are firmly held by the Chipping Sodbury Building Society and they'll probably make it a condition of the mortgage that you have buildings insurance.

Buildings insurance usually covers more than just the main building. Outbuildings and garages can be covered, plus pretty much everything that's a permanent fixture outside, including gates, fences, drives and swimming pools.

BUT (notice that this is a big 'but') there are lots of exclusions for all these extra things. To take an example, gates and fences are not usually covered for storm or flood damage. Another example is that in order to make a subsidence claim for your swimming pool, the main building also has to be affected.

With those sorts of exclusions in mind, buildings insurance usually covers damage caused by:

• flood;
• subsidence;
• heavy storms;
• fire;
• smoke (but not smog);
• lightning;
• vandalism and theft (or attempted theft);
• escape of water and oil (The water damage is covered, but often the repairs to the faulty tank, pipe or appliance are not.);
• falling trees and branches, and
• falling aerials and satellite dishes. (The damage caused by the falling aerial or satellite dish is covered, but not damage caused to it. The actual aerial or dish can be covered under a household contents policy.)

You can get other cover that some insurers include in the basic price and others charge extra. This includes:

• the cost of using alternative accommodation if your home becomes temporarily uninhabitable;
• cover against your own liability if you injure someone or damage their property (usually £1m); and
• glass, baths and wash basins.

The excess

Typically, you pay a £50 excess for most claims, although you'll pay more like £1,000 for subsidence claims. The insurer might offer a policy with a higher excess if it thinks there's a greater risk of you making a claim. Alternatively, you can ask for a higher excess in order to get a lower premium. If you wouldn't claim for any damage worth less than £100, it makes sense to increase the excess.

How much to insure your property for

The sum insured should be the rebuild cost of your property, not how much it's worth. You don't want to over-insure yourself. If your property is levelled by a freak tornado, the insurers won't pay out more than the building costs to rebuild, so you'll have paid a higher premium for nothing.

The cost of under-insuring yourself is much more sinister. Let's say that the rebuild cost of your property is £100,000, but you insure it for 20% less than this at £80,000. If your house burns down your insurer will only put £80,000 towards the rebuilding costs.

Even worse, if you have a smaller claim you'll still lose out. If you suffer £10,000-worth of storm damage, the insurer will say that you are under-insured by 20%, so it will deduct 20% from your claim. So it will only pay £8,000 (less your policy excess).

But have no fear! Most people can get a pretty accurate rebuild valuation at no cost. The Building Cost Information Service (BCIS) has a neat little rebuild cost calculator. This can be used by anyone with a 'normal' house, which means it's:

• a house (not a flat);
• built from brick;
• not more than two-storeys high and without a basement or cellar;
• of average quality and design;
• got no hazardous materials like asbestos; and
• not listed or considered to be historic.

Don't forget to add an appropriate amount for your garage, patios, paths, fences, swimming pool and so on.

For everyone else, you should pay for a Chartered Surveyor to value the rebuild cost. You can find a local one by visiting the Royal Institution of Chartered Surveyors' (RICS) website.

Don't forget the rebuilding cost can go up each year

Most years the price of materials and labour goes up. Plus, if you are going to add an extension, make sure you talk with your insurer about it before-hand.

Some insurers offer policies linked to rising prices (inflation), so that the cover goes up automatically each year. However, inflation in the construction industry often doesn't match the average, so keep an eye on it and on the BCIS's rebuild calculator. If a large discrepancy builds up, you should amend your cover.

Reduce the risk and cost of claims

Hopefully you'll never need to make a claim, but don't just rely on hope! There are some things you can do to reduce the risks:

• Don't plant trees and shrubs too close to your property or your neighbours' property, and consider the proximity of trees to underground drains.
• Prune trees and shrubs regularly. The ABI goes so far as to recommend that you seek expert advice from an arborist to make sure they're pruned correctly.
• Take professional advice before planting or felling trees.
• Carry out regular checks for blocked or leaking drains; clear dirt and leaves from gutters; and check pipes for splits.

Fire

A bigger and more common danger is fire. You can greatly reduce this risk with the following steps:

• Fit at least one smoke detector on each floor, and test them regularly.
• Check your electrical wiring, check flexes and cables for exposed wiring, and only use a qualified electrician to carry out repairs or alterations.
• More fires start in the kitchen than anywhere else, so don't leave anything heated by flame unattended.
• Chip fat is a major cause of fire. If fat catches fire, smother the flames with a damp cloth, or a lid or plate. Don't try to use water to put it out.
• The ABI recommends you have a household fire blanket or fire extinguisher (although only the wet chemical extinguisher used in professional kitchens can handle pan fires).
• Store flammable liquids, such as methylated spirit, adhesives and paints, in a secure and tidy place, preferably in your shed.
• Bin or recycle your rubbish, as it could be fuel for a fire.
• Think about any additional fire hazards associated with special occasions, such as party decorations, Christmas tree lights and barbecues.

Flooding

If you live in a flood risk area, you should:

• Listen to local radio and Environment Agency Floodline bulletins.
• Collect personal belongings, including insurance and bank details and store them in a waterproof bag.
• If it's safe, move property upstairs.
• Be prepared to switch off gas, electricity and water at the mains.
• Contact your insurer immediately after the claim arises. It should be able to advise on what to do next.

Keep the cost down

If your property is damaged, you have a responsibility to stop the damage getting worse. Many policies cover the cost of temporary work and provide emergency help lines.

Whatever you do, don't go fixing non-emergency damage without contacting the insurer first. They don't like being presented with a bill from the start.

Cheaper insurance

If you're currently insured via your mortgage lender, you're probably paying over the odds. Whoever you're with, don't just renew each year, as that's the easiest way to be overcharged. For just a little effort, the savings over the long-term can be considerable.

Also, beware of direct debits, as you can be charged 30% interest! It makes more sense to save up, or to pay for it using a 0% on purchases credit card.

Compare home insurance quotes

Next article: Contents insurance

Published on December 8, 2006