Home Insurance Advice: Five Things You Need to Know but Probably Don't

Home insurance is designed to protect us against financial loss due to unfortunate circumstances surrounding our homes. That protection may come in the form of replacing a house destroyed by fire, replacing goods stolen during a burglary, or even protecting a homeowner from liability in the event of an accident.

Home Insurance Advice

Unfortunately, most homeowners are unaware of the fact that policies evolve over time to the extent that what they have today is nowhere near what they had just five years ago. Below are five you need to know about home insurance but probably don’t?

Renters May Void Insurance Policy

In September 2009 The Guardian published an article addressing the question of taking lodgers and how effective a home insurance policy. According to the details of the story, it is not uncommon for insurance companies to deny claims from customers who have rented rooms to strangers. This is especially true when the stranger happens to be a student.

According to The Guardian, insurance companies like Direct Line and Churchill believe renting to students increases the risk of a homeowner claim due to the lifestyle of the typical young person. Many insurance companies consider a policy null and void as soon as a renter moves in.

In other cases, an insurance company will continue to offer a policy, at a slightly higher price, as long as the owner of the home reports the renter accordingly. However, failure to do so is considered a failure of full disclosure under the law and allows an insurance company to deny a claim. The Guardian cites several examples of people who ran into trouble with their insurance companies because of lodgers.

Index Linking Changes Value of Policy

Companies offering home insurance in the UK use something known as index linking to adjust the value of policies every year. Typically, this results in a policy value going up in relation to real estate costs, rebuilding estimates, and inflation. However, homeowners should be aware of index linking especially if they have significantly upgraded their properties.

If index linking results in your insurance policy being devalued, it is important to find out why. The last thing you need is for your home to be seriously damaged and not get enough money from your insurance company to make the necessary repairs.

If you believe the value of your insurance policy has been increased or decreased inappropriately, you always have the opportunity to file a complaint with the Financial Services Authority. They may not be able to force your insurance company to make an adjustment, but at least they are able to look into the matter and make sure the law has not been broken.

Buildings and Contents Cover Not the Same

Some people have the mistaken belief that buildings cover and contents cover are one in the same. They are not. Buildings cover is for the actual structures on your property including your home, garage, and any outbuildings you choose to ensure. If your home is destroyed by fire or damaged by some sort of storm, buildings cover pays to replace or repair it.

Contents cover protects you against loss of your personal belongings. This Is Money describes the things covered by contents insurance as anything you would take with you if you were to sell your home and move to a new town. All of those items would be part of your contents. Anything left in the home, such as solar panels, would be covered under buildings cover.

The reason this is important is that these two types of cover make up the bulk of what you are paying for. As long as you are paying both, they need to be adequate in relation to the real value of your property. When it comes to contents cover, it is extremely important for homeowners to take an inventory of their personal longings and come up with a reasonable estimate of the total value.

Emergency Entry Not Always Covered

Sometimes in an emergency responders are forced to damage your home in order to gain entry. Few homeowners are aware that their policies may not pay for such damage without a special, extra cover. The good news is that most insurance companies are now making this cover available for little additional money.

To find out whether or not you have extra cover for emergency services just ask your insurance company representative. If you do not you should be able to add it easily.

Cover for Legal Expenses Offered

Did you know you could be held liable if a guest to your home is injured or killed? It's true. It is also true that some home insurance policies only cover the liability portion of any claim made against you by injured parties. You will need extra cover if you want to pay for your own legal expenses also.

Legal expense cover reimburses you for money paid to a solicitor, attorney, or court for various legal fees. Some of the better policies will even pay for criminal defence, probate litigation, identity theft issues, and expenses incurred because of jury service.

Keeping Your Home Insurance Rates Down

In all likelihood, your home insurance rates will increase from year to year as a matter of course. However, homeowners who simply purchase a policy and forget about it may be paying more than they really need to. Especially those who have had the same policy for several years running.

In order to keep your home insurance rates as low as possible you should consider the following:

  • Annual Price Comparisons - When you first purchase home insurance, you are most likely to spend quite a bit of time shopping around for the best policy. That is a practice that should not cease once you have decided on a given company or product. You should compare on an annual basis just in case your original provider is no longer the best choice.
  • Be Careful about Claims - If your home insurance is like most others, your rates will go up in the event of a claim. Depending on the size of your claim, the increase may be small or rather sizeable. You can prevent claim related increases by avoiding small claims, paying for minor issues out of your own pocket instead. If you do have to make a claim then do everything you can to make sure it is not inflated. Not only are inflated claims against the law, they contribute to higher prices in the future.
  • No Claims Discount - In addition to doing what you can to prevent unnecessary claims also keep in mind many insurance companies offer no claim discounts. These discounts reduce what you pay for insurance for every consecutive year you go without a claim. After so many years, you can protect your discount permanently. No claim discounts are one small way you can actually get some value out of a policy even if you never make a claim.
  • Accept Higher Deductibles - Home insurance is all about risk; the amount of risk taken by your insurance company as compared to the amount of risk you are willing to assume in the event of injury or accident. You can offset your insurance company's risk by accepting higher deductible amounts. The more you are willing to pay in deductibles then the less you will be charged from year to year.
  • Payment Protection Insurance NOT Always Wise - The topic of PPI insurance was all over the news last year thanks to a small number of providers who were unscrupulous in their dealings with customers. As a consumer, you need to know that PPI is sometimes not appropriate for your situation. If you are currently paying PPI you might want to examine your policy find out exactly what it does, and does not, cover.

Conclusion

Consumers who own homes do not have much to say in terms of whether or not they have to carry insurance on their properties. However, they have plenty of say about the company from whom they purchase a policy and how much cover they will purchase. That means there is really no reason for a consumer to be inadequately covered.

There is no better time to take a serious look at your home insurance than right now. If your policy is more than a year old then you should take a few minutes to compare it against the policies of other companies, looking at both the bottom-line price and the types of individual coverage provided. Consumers who discover they are not getting the best deal should then take the opportunity to find a new provider.

Here are links to some of the more well known insurance companies offering home cover in the UK. These are good sites to begin your home insurance search.

Aviva – Aviva will be with you in two hours to secure your home after a break in, they will replace your locks if the keys to your home are accidentally lost or stolen and with 20% discount when you buy online it's worth getting a quote from them. (You won't find them on any price comparison site so it's worth getting a quote off them separately before using comparison sites).

Since you should be comparing quotes from multiple companies, you might find the following financial service comparisons sites helpful. These links allow you to get multiple quotes from among a good pool of UK providers.

TescoCompare - TescoCompare was awarded the Best Insurance Comparison Site for 2012 by the What Mortgage Awards. They provide you with quotes from more than 35 different carriers and offer up to 12 months of key protection service if you purchase through them.

Compare the Market - Get your home insurance quote here in just a matter of minutes by filling out a simple, online form. Should you decide not to buy today you can retrieve your stored quotes later on.

Go Compare - Compare home insurance rates from 85 providers on this site. Independent research firm Consumer Intelligence suggests nearly 99% of those who use this site save on their home insurance.

Moneysupermarket.com - More than 95 insurance companies are represented on this site. When you quote and purchase a Tesco policy from moneysupermarket.com, you earn 1,000 Clubcard points.

Confused.com - You can save as much as £229 per year with this site. They offer quotes from 84 insurance providers as well as 2,000 nectar points when you purchase online.

uSwitch - Compare quotes from 40 different providers on this site. They also offer some helpful information about choosing the proper insurance for your home.

Money.co.uk - This site provides quotes for more than 600 different policies from companies like Churchill, Sainsbury's  Bank, Nationwide, and Tesco Bank. You can compare general prices without ever asking for a quote.

Money Saving Expert - Everything you ever wanted to know about home insurance and purchasing a policy. This site covers a wide range of topics including how to determine how much cover you need, avoiding monthly payment plans, etc.

More insurers you may wish to check out include:

Sainsbury's Bank - Sainsbury's offers a number of financial services including home insurance. They are currently offering a discount of as much as 20% plus 3,000 nectar points for current cardholders.

Barclays - Home insurance from Barclays can include up to £500,000 for buildings and £80,000 in contents cover. Online discounts of up to 25% are possible.

Direct Line - You can purchase several different types of insurance from Direct Line including home insurance. They offer all the traditional lines, plus specialised lines and up to £25 cash to pay cancellation fees incurred under your current provider.