Introduction - making sure your Buildings
and Contents are insured for the correct value is fairly simple and regular
checks should be made to make sure that your sums insured are adequate to
protect your needs.
Contents Insurance - most modern
Contents Insurance policies are written on what is known as a new for old basis,
this makes settling claims easier for the insurance company and means that you
will receive funds to buy a brand new replacement item. This type of cover
would seem to go against the principle of Indemnity (leaving you in the same
financial position after the loss as you were before it) but is now the standard
form of insurance contract available. To obtain cover on a new for old basis you
have to make sure that you have insured your contents for their full replacement
value. The only l way to do this accurately is to go from room to room making
notes as to the costs of items as if you have just gone out and purchased them
Wear and Tear - if you are then unfortunate to suffer a loss and cover is
confirmed under your policy, a claim will be met without deductions for wear and
tear. There are some notable exceptions such as damage to clothing. To give you
an example, if your Television is ten years old but if you have insured it at
today’s replacement cost, then it will be replaced with a new television. It
must be remembered that most policies will give the insurers the right to
reinstate the Item, they may not offer your cash, and they make use a supplier
of their own to replace the item for you. This helps keep claims costs down
which of course are in turn reflected in insurance premiums staying at a
competitive level. Failure to insure your contents for the correct amount
could well lead to the imposition of an Average clause following a claim the
principle of average is explained later in this article.
Building Insurance - you should
insure your Building for its full rebuilding or reinstatement cost. This is not
its market value and the amounts can differ vastly. The selling cost of your
property could be considerably higher as this figure will also include amounts
factored in for the price of the land based on the actual location. The
rebuilding cost is only the amount to rebuild the property (don’t forget you
already own the land) with an allowance for reasonable Architects & Surveyors
fees, site clearance etc.
When should I insure my Building? -
this question often causes a great deal of
confusion amongst prospective policyholders. The purchaser of a building becomes
responsible to insure the property after the exchange of contracts (in Scotland
after the seller has agreed to accept the offer). If you purchase a building at
a property auction, you may find yourself responsible to insure the building
from the moment the hammer falls and the property becomes yours. Some auction
houses are able to offer a 28 day temporary cover and if buying by this method
auction, you should enquire about insurance before you proceed. Some
people decide to wait until the actual completion date but this is incorrect. At
the exchange date of the contract you are responsible to pay the full purchase
price of the property even if in between dates the property burns down before
the completion date In practice, most completion dates are within a month but
sometimes they can be longer and during the winter months especially in the UK,
you may find the property suffers storm damage or worse. If you are selling a
property, although the purchaser should insure the property as mentioned above
from the exchange date, often they forget and thus it is prudent to keep the
property insured until such time as you move out.
A number of building insurance
polices now include a contracting purchasers extension which will grant the same
cover to the incoming purchaser as is afforded to yourself. Obviously, if the
person has covered themselves, then this extension will not apply. In the event
of a claim occurring between the exchange date and the completion dates, both
insurance companies will need to be informed of the loss and they will
communicate with each other to decide the question of liability.
One of the most common mistakes
made when insuring a building is to over look to include the interest of the
mortgage lender. Often this oversight is only noticed on the day that the
contracts are exchanged and it can lead to a delay in the funds being released.
Most lenders will now allow you to arrange your own building insurance policy
thus enabling you to shop around for the best deal, they will need their
interest noted on the schedule of insurance to satisfy the Contract Rights Act.
This act states that for anyone to receive a benefit from an insurance policy,
their interest needs to be noted on the schedule of insurance. They will want to
see a copy of the policy document and usually will make a request that the
actual insurer signs a declaration confirming that the cover meets the minimum
requirements as laid out in the council of mortgage lenders handbook. Proof of
cover in almost all cases has to be with the lender prior to funds being
released, leaving it to the last minute may lead to delays.
We have mentioned above the
contract rights act and mortgage lenders but this equally applies to individuals
that have interests in buildings. If you are responsible for the
insurance of a
block of flats for example, you should make sure that the insurance company has
also made a note of the other flat owners
Copyright Assetsure Limited 2007
UK buildings and contents cover for home owners
