Guide to UK Home Insurance
Buying suitable home insurance to fully protect your home and contents is one of the most important financial decisions home owners face each year. Home insurance is designed to protect your building and all your personal belongings against a wide range of common perils. Its usually possible to extend cover to include accidental damage. and cover against ” All Risks” on valuable items whilst they are away from the home. There is usually a range of “extra” covers such as Legal Expenses that you can pick and choose to suit your needs.
The cost of repairing, replacing or reinstating items can often be financially crippling. For small amounts most household budgets would cope with an unexpected amount of damage but for larger claims who could honestly (or would want to ) pay out tens of thousands of pounds to repair or replace items. Home Insurance is vital to the economy by enabling homeowners to transfer risk to an insurer in return for the payment of a premium. It is important to understand the benefits of home insurance and how it works in practice. There is a temptation to compare home insurance costs against the possibility of an occurrence happening. This is a good example of being penny wise and pound foolish. Policy holders should take time to understand the potential perils of being a home owner, how to buy cover, where to seek insurance advice and the differences between competing home insurance policies. There are no laws stating that you must buy home insurance, it’s a matter of personal choice. However, if you have a loan or mortgage secured against your home, then your lender will expect you to have home buildings insurance in force to protect their financial interests and to keep insurance in place for the duration of the loan with their interest noted.
Tips for a Cheaper Home Insurance Quote – obtaining cheap buildings and contents insurance, is one of the reasons why consumers have turned to the internet to source their quotations. Obtaining home and contents quotes online is one method of trying to save money, but apart from shopping around, what can actually be done to help bring down the price of your policy? Here are our tips:-
- No Claims Bonus - many UK home insurance providers, now allow a no claims bonus in return for a claim free period (a bit like on your car insurance). Discounts vary from 5% upwards; it may not always be obvious that this discount is available, so it’s worth pointing it out. If you buy a new home, it’s may be possible to transfer the discount from your previous property. No claims discount under home insurance can help save a good deal on the premium, providing of course you stay claim free.
- Increasing Your Excess - excess, is the first portion of the loss that you as policyholder, elect to pay in the event of the claim. Most policies will also come with a compulsory excess of between £50 & £100. You can elect to pay a higher (voluntary) excess in return for a discount. These excess discounts can make a difference, make sure however you are comparing home insurance quotations on a like for like basis, find out what the total excess payable is. Under home insurance, voluntary excess and compulsory excess have to be added together , to reach the total amount you will be expected to pay. Some insurers include quite a high policy excess and this can distort the premium when in comparison with others.
- Combining Policy Sections – many people have separate policies covering buildings and contents, unaware of the fact that often substantial discounts are available for combining the two covers under one policy. Often, these covers are due for renewal at different times of the year. It is usually possible to add one to the other and pay a pro rata difference. Do make sure though you ask for a separate buildings and contents quote, then you have covered both options. Its vital to do this as apart from the convenience of one renewal date and convenience of one insurer, the only real value of a combined home insurance policy, is the premium saving it may offer.
- Improving Security at the Property – In many cases, the insurers will have a minimum standard of security requirement, before insurance for the home is acceptable. You can consider upgrading the security at your home to include better quality locks on doors and windows or an alarm. Alarms fall in to a number of categories from a simple ‘Bells Only’ arrangement through to a system that is maintained under contract and involves the property being ‘monitored’ at a central station. If you intend to fit an alarm and are expecting a discount, it is probably best to speak to an insurance company first, not all alarms are the same and it may be a requirement that the system is fitted by a recognised professional body. What is of paramount importance, is that you take home security seriously, if you insurers have told you they want the property protected by certain types of locks, its likely a claim would be refused if you fail to comply with the policy conditions
Home Insurance Policy Wordings - when you buy your home insurance policy, you will be presented with a number of important documents. It is important that all documents are studied carefully to ensure that you understand what you are being offered and it matches your needs. Home Insurance can be a little complicated, especially if you are unfamiliar with any of the terms. If you have any questions, always refer back to the product provider who should be able to answer any questions for you. There are three main sections of a UK home insurance policy, as follows; Buildings, Contents and All Risks. Until recently, it was normal practice for a lender to want to arrange the buildings cover on a home they had lent money on. The reasons for doing so were; to protect their financial interest (the outstanding balance of the loan) and of course, they could earn commission from any product sold. The problem for consumers was that often lenders were restricted in the number of insurers they could place home insurance with and thus the premium obtainable was not always the cheapest or the best/most suitable. This practice has now been very much relaxed and normally homeowners are free to buy their home buildings insurance from wherever they choose. In some cases, as a condition of a cheap rate or fixed rate mortgage deal, it is a requirement that the lender arranges insurance on your behalf. Unless this is the scenario, you cannot be forced to arrange home insurance with the lender. That said if you do arrange cover away from your mortgage lender, they will probably want to see a copy of the policy document and to see their name on the policy schedule. Homeowners often find that by combining buildings & contents under a home insurance policy, they can make savings.
Buildings & Contents Policies – both buildings and contents insurances are available as stand alone policies, many people (particularly flat owners) find that someone else has the responsibility of insuring the fabric of their home and thus they only have to arrange cover in respect of their home contents. All Risks covers (cover for items temporarily away from the home) can only be added to a contents insurance policy. Although polices will vary from one insurer to another, in general there are two standard forms of cover available.
Standard Insurance Perils with Extended Accidental Damage - these ‘perils’ have been developed and extended over a period of many years and offer insurance protection in respect of a wide range of eventualities that can befall a homeowner. With regard to the building section of a building insurance policy, cover will have to satisfy the terms and conditions of the council for mortgage lenders handbook. Almost all lenders are members of the council and if you have a mortgage on your property, The list of perils required is quite wide and almost all “sudden & unforeseen” events are included. Accidental Damage is an option, but most homeowner insurance policies will already include a certain amount of accidental damage free of charge.