Finding a Policy
Choosing the best deal from the wide range on offer can be a nightmare. Many companies now offer all-siniging. all-dancing policies but beware - the number of conditions, caveats and exclusions has also expanded. You need to pick your way through the insurance jungle with the greatest of caution. Be aware that if you move house you may need to change both policies because the risk has changed.
Buildings Insurance
As well as providing for problems with the structure of your home, buildings insurance gives cover for permenent fixtures and fittings such as baths, toilets and fitted kitchens. Policies usually include garages, garden sheds and greenhouses as well as boundary walls,fences, gates, paths, drives and an outdoor swiming pool.
Adequate buildings insurance is a condition of a loan being granted by a mortgage lender. If you own a flat, your freeholder will probably arrange the buildings insurance for you. And if you rent a home, either from a council or privately, buildings cover will be arranged by the owner.
Typically, your house is covered against a stated list of risks. These range from damage caused by flood, fire or subsidence to damage caused as a result of theft, by storms or maliciously.
Most policies pay for accidental damage to underground pipesand cables, glass in doors, windows, baths, basins and toilets. Cover may be extended to include damage caused by DIY mishaps, but the insurer may charge extra for this.
Amount of Cover
The 'sum insured' is the amount of money for which your home is covered and is the most an insurer will pay even if your home is burnt to the ground. It is also the amount it wold cost to rebuild your home although that's not the same as your home's market value, which could be greater or less.
A chartered surveyor who is a member of the Royal Institution of Chartered Surveyors will prepare a professional rebuilding cost assessment for buildings insurance purposes. You can work out your own sum insured, though the calculations are pretty complicated. (The Association of British Insurers has a useful guide on this and many other topics).
Some Insurance companies offer unlimited cover. This means you don't have to worry about how much cover you need or whether it is adequate. Other insurers offer premiums based on a simple assessmenr of where you live and the type, age and size of your property.
Premiums may be paid monthly or annually. If you are offered a monthly option, check whether the insurer charges extra for the privilege of spreading the payments.
Exclusions and Excesses
Common exclusions are storm damage to gates or fences, frost damage and structural damage caused by sonic bangs from aircraft. Find out what these exclusions are before selecting your policy so that you do not have any nasty surprises.
Buildings insurance does not cover wear and tearso if yourproperty is not in a good state of repair a claim may not be paid in full.
Your insurer may apply restrictions if your home is not lived in for more than 30 days.
Most insurers insist you meet the first part of any claim. The level of excess depends on which section of the policy you are claiming. it's typically between £50 and £100 but in the case of subsidence claims the excess can be as much as £1,500.
Subsidence
If your home is an area prone to subsidence, the increased level of risk means that your premiums or excesses will be higher. However, even if your property has been affected by subsidence you should still be able to insure it as long as repair work has been carried out successfully, and you can take a number of steps to minimise the risks.
- Contact your buildings insurer at the first sign of any structural damage to your home - for example, if cracks wider than the edge of a 10p piece appear in a wall. The quicker a problem is identified the easier it is remedied. Most cracks turn out to be evidence of subsidence and can be dealt with by using grout or sealant.
- if you are planting trees, find out their expected mature height then palnt them at that distance from your house. A young Scots pine may be only one metre high in thelocal garden centre but in your garden i could grow to a lofty 30 metres.
- Don't remove established trees without consulting a specialist, especially in clay soil areas. The clay could swell and destabilise your home's foundations.
- Prune trees and shrubs to a sensible height. This reduces the risk of soil drying out and subsidence developing.
- Clear gutters regularly of leaves, dirt or rubbish and clear blocked drains immediately.
- Check pipes for leaks, especially during winter.
- Always have a full structural survey carried out when you buy a home. It will identify potential problems.
Keeping Your Policy Up-To-Date
Once you've bought a satisfactory policy it's essential that your cover remains up to date and adequate. Most insurers automatically index-link your sum insured to take into account changes in rebuilding costs - but double-check that yours does.
If you improve your home - perhaps by installing central heating or buiding an extension, tell your insurer. The sum insured will probably need to be adjusted upwards. Shop around for alternative quotes when your policy is due for renewal. You could find a better deal elsewhere.
Contents Insurance
A contents insurance policy covers everything you would take with you if you moved home. That typically includes furniture, household goods, food and drink, televisions, videos, computers, stereo equipment, clothing and valuables, usually, up to a stated limit. Boats, caravans and motors are normally insured separately.
No mortgage lender can insist that you take out contents cover and you need to organise it yourself. The policy pays out if any of your home contents are lost or damaged.
Claims are usually made after a burglary or a fire but a policy should also pay if your possessions are damaged or lost as a result of an explosion, water leaks or if your home is vandalised.
Many insurers cover the cost of replacing locks if your keys are stolen. Most policies pay for accidental damage but the extent of cover varies so check this. Lots of schemes pay to replace accidentally broken mirrors and glass in furniture while some policies cover accidental damage only to televisions, videos, computers and stereo equipment.
Most policies may be extended to cover accidental damage or loss of valuable items that you frequently take out of your home. This option, known as an all risks extension, may be used to cover jewellery, cameras and sports equipment.
You should also check whether you are covered if you accidentally injure another person or damage their property. Most policies pay damages for which you are legally liable up to a maximum of £1m.
Some Insurance Companies provide flexible policies that automatically increase the level of contents cover at Christmas to account for the gifts you are likely to have around the house. Some firms increase cover for couples about to marry who may have wedding presents stored at home.
And some schemes cover children who go to college, providing free student cover for household goods and personal effects. The amount may be up to 15% of the sum insured.
Bear in mind that contents insurance will probably not cover losses arising from business activity at home. Your insurer may extend the policy to provide such cover or you may need to buy a specfic policy to cover working from home.
The Sum Insured
Like buildings cover, the sum insured is the total amount of money for which your contents are covered. It's the most your insurerwill pay even if your possessions are totally destroyed and it determines the premiums you pay so it's vital you calculate the amount correctly otherwise you could lose out when claiming.
When choosing your cover, check whether your poilcy offers a discount on premiums. Some insurers cut contents premiums for people over 45, security-conscious homeowners with security locks fitted to every point of entry, non-smokers and people with a claims-free history. Discounts are also available to those who combine their contents and buildings insurance or who use the same insurer for their car and home.
Most people don't have a clue how much their possessions are worth. To get an idea of the sum insured go through every room in your house - including the loft, garage, cellar and garden shed - and write down what it would cost to replace every item at today's prices.
The only exception is clothing and household linen where the value should be adjusted downwards to reflect wear and tear. A man's suit for example, has a life-span of five years for insurance purposes. For each year you've had the suit, its value should be reduced by a fifth.
The total will probably surprise you - most people underinsure themselves - but your contents insurance should be based on it. Some insurers offer a maximum amount of cover which, if sufficient to cover all your possessions, removes the need for you to calculate an accurate sum insureed. If it's insufficient, most companies offer extra blocks of cover. As with buildings insurance, premiums may be paid monthly or annually.
It is important not to let or sub-let your house without telling your contents insurer - your poilcy will likely be declared null and void. Letting increases the risk of a claim so an insurer will probably impose conditions on your policy and increase your premiums. Most contents policies will not meet a theft or damage claim if you let or sub-let your house and there is no evidence of forced entry.
Different Types of Policy
Most insurance companies offer two types of contents policy. New-for-old policies, sometimes referred to as 'replacement as new' cover, meet the full cost or replacing items if they are stolen or destroyed. Alternatively, the cost of repair will be met if the items are damaged.
Most household items apart from clothing and household linen may be insured on a new-for-old basis, but you should check the policy for exclusions. Insurers usually apply an excess to every claim on a new-for-old policy..
Wear-and-tear policies, also known as indemnity policies, pay to replace or repair your possessions, but with an appropriate reduction for wear, tear and depreciation. Beacause claims are smaller, premiums are lower than for equivalent new-for-old policies. Many insurers will still apply an excess to claims.
Most policies contain a range of exclusions and limits on individual claims. Commonly, there are limits on the value of works of art, ornaments, jewellery or other expensive items. The insurer may agree to raise there though it may be wiser to insure high-value items separately.
Most insurers automatically link the sum insured under your policy to inflaction so that it increases in line with inflation. Check that yours does. If you add to your possessions, ask your insurer to increase the sum insured to reflect the increased value of your contents.
Making a Claim
You need to follow a few simple steps. Check whether the claim you want to make is covered by your insurance. Your policy documents should explain this, but if in doubt contact the insurer. If your claim involvesburglary, theft, malicious damage or vandalism, contact the police immediately.
Ask your insurer for a claim form as soon as loss or damage occurs. Complete it as soon as possible and return it to the insurer with estimates for the cost of repairs or replacement. If you cannot obtain estimates immediately, send the claim form first and send the estimates later.
Keep all damaged items - the insurance company may want to see them. Keep bills for immediate emergency repairs - they may form part of your claim.
If you have a claim of any substantial size your insurer is likely to send out a loss adjuster. Loss adjusters are not independent but are there to represent the company's interests.
A loss assessor, on the other hand will represent your interests, dealing with the insurance company on your behalf. They are usually paid on a commission basis. The more money they recover, the more you pay them. Because they are paid commission, insurance companies tend to be dismissive of assessors' work but if your claim is a reasonable size (at least £10,000) it may be worth contacting one. The Institute of Public Loss Assessors (0208 988 7581) will help you find one in your area.
Complaining
The Financial Services Authority regulates how motor, home and contents, private medical and some travel and warranty insurance is sold.
Life insurance, such as income protection, term insurance and critical illness plans, which do not rely on investment performance, also fall into the net. This means complaints can be taken to the Financial Ombudsman Service. The FSA, however, exempts most holiday insurance sold by travel agents and extended warranties sold by shops.
Specifically, insurance that lasts for less than five years, or costs less than £333 or 500 euros a year won't be covered.