What to Consider When Insuring Your Home
Why you shouldn’t use comparison sites alone when insuring your home.
Comparison sites are great at saving you time and money on the face of it, however. cover varies widely. The cheapest quote may not give you the cover you actually need, which means you could lose out if something happens to your home or your belongings.
No single comparison site covers the whole market, so it is worth checking with a couple of them to get a broader view. Remember your current supplier and check with them to see if they can beat the best quote, as sometimes they can.
Comparison sites are prone to making assumptions to speed up the search process, so double check the cover before you buy as it may not be suitable for you. We put some things to think about here to make you more savvy when using comparison sites.
What is home insurance?
There are three basic types of home insurance, buildings, contents and combined buildings and contents cover.
- Buildings insurance covers the structure of the building and the fixtures and fittings.
- Contents insurance covers your belongings.
The combined cover is for homeowners. If you have a mortgage, buildings insurance is necessary to get your mortgage agreed. If you rent a property, the buildings insurance is the responsibility of your landlord and you should take out contents insurance as your landlord will not be liable for your belongings.
What is covered in a standard insurance policy?
Don’t assume anything! Each insurance company works differently. What may be included with one, will be an added extra for another. Make sure that you are comparing like with like.
Here are a few items that are normally added extras, so you will need to pay more for them:
- Accidental damage cover for buildings or contents
- Home emergency cover E.g. burst pipes
- Personal belongings cover for contents away from home
Check the excess on the policy, these are all different and this is the money you will have to pay as soon as you make a claim, so be aware of how much it is. There are compulsory and voluntary excesses and raising them will lower your premium, however, you need to make sure that you can afford them if you have to make a claim!
If you are using comparison sites to cut down the amount you are paying for home insurance, be aware that taking insurance out in monthly payments is going cut down the amount you save by a large margin. Some insurance companies are charging more interest than some credit cards, we found a wide range from 16.5% to 33.2% for monthly payments rather than paying it all at once.
Things I need to think about
Before taking out a combined policy, check the excesses, as some insurance companies have separate excesses for each insurance, which could be costly if you have, for example, flood damage which can cause problems with the structure as well as the contents.
If you decide to take out separate cover and you have a misfortune, the insurance companies may fight over who is liable for what. This is very rare, but can happen.
Do not over cover your buildings insurance. It’s only the rebuild value that they want, not the resell value. You need the cost of materials, labour and architects if necessary. It should also cover the cost of somewhere for you and your family to stay while your home is being rebuilt. You can get a reasonable rebuild value from the calculator on the Association of British Insurers website.
Also, do not under cover your contents insurance. Be realistic about what your belongings are worth otherwise you may lose out if something unforeseen happens. Go through each room in your house and work out how much all your furniture, crockery, white goods, clothing, books, toys, jewellery and miscellaneous items would cost to replace if you lost the lot.
Remember, you don’t just have to use comparison sites. You can use the insurance company’s own websites. Some are not listed on comparison sites and they can actually be cheaper. You can go to your bank or your mortgage provider, or a financial planner is there to trawl the companies on your behalf and get you a great deal and they know what they are looking for.
If you’re confused about how to insure your home – talk to a financial adviser who can give you pointers and help work out where you could save and still get the best cover.
If you found this article useful, click here for How To Pay Off Your Mortgage Early