Cut the cost of home insurance
One in four people have cancelled or failed to renew their home insurance in order to save money, leaving them at risk should they fall victim to theft or damage from fire or flooding.
A new piece of research from the Association of British Insurers (ABI) and YouGov found that 22% of people have ditched their home insurance, while 17% have cancelled their buildings insurance. Scotland is the worst region affected, with 28% of people admitting they no longer have any home insurance in place.
The figures have prompted concern among insurers, as failing to have home insurance in place could leave homeowners and renters are risk if they are burgled. Failure to have buildings insurance, meanwhile, means any flooding or fire damage, for example, could leave them financial exposed.
“Cutting back on insurance protection is a false economy,” says Stephen Haddrill, director general of the ABI. “In these uncertain times, insurance provides a vital financial safety net to steer individuals, and families through the recession, as well as helping to provide long-term security.”
Recent figures from Saga show that almost half of burglaries happen when the homeowner is on holiday – making the summer a particularly risky time to ditch home insurance. To make matters worse, the number of break-ins is expected to increase during the economic downturn - during the last recession burglaries jumped 33.8%.
Quick guide to home insurance
There are two types of insurance. The first, building insurance, covers your house from any accidental damage that requires building work to be carried out. For example, this might include damage from a fire or vandalism to subsidence or a flood. Homeowners with mortgages are required by banks and building societies to take out buildings insurance.
When buying buildings insurance, the ‘sum insured’ is not the market value of your home but rather the amount it would cost to rebuild your home from scratch. It is also the total amount of money an insurer will ever pay out.
The second type, contents insurance, is available to both homeowners and renters and covers your possessions within your home from theft or accidental damage. Some policies will also protect portable items, such as laptops and cameras, away from the home although you’ll have to pay an additional premium.
You can choose whether to protect your possessions (from clothes to furniture and white goods) from accidental damage as well as theft. You will also need to consider whether to opt for a new-for-old policy that meets the replacement or repair cost of any items, or an indemnity policy that replaces exactly what was there before.
Homeowners can choose whether to buy separate buildings and contents insurance or opt for a combined policy. The latter option is easier to organise and can often be cheaper.
Things to consider
* If you use your property as a business then you will need to find an insurance policy that covers working from home.
* Do you want the cover to include outbuildings such as a shed or garage?
* Do you want to extend your contents insurance to cover any damage or loss of items that you regularly remove from your homes, such as laptops and jewellery?
* Many policies have exclusions so find out what these are before signing on the dotted line.
* Do you want your contents cover to automatically increase the level of cover around Christmas time to include gifts?
* Do you want your insurance to include any offspring living away from home at university?
* Do you intend to sub-let a room or rent out your house? If you don’t tell your insurer your policy could be redundant.
• Do you want any extras, such as cover for home emergency to cover any emergency work needed?
Does exactly what it says on the tin: covers the contents of your home for theft and damage and also may insure certain possessions (jewellery, cycles) outside of the home. Things to watch for include the excess and also the maximum payout on individual items. Another grey area is kitchen fittings, as some contents policies say these are not contents but part of the fabric of the property and covered by buildings insurance and some buildings policies don’t cover them because they regard them as contents.
This type of insurance covers the structure and fabric of your property – the bricks and mortar, not the contents (for which you need contents or home insurance). If you have a mortgage, the lender will insist you have a suitable buildings insurance policy in place. Many lenders offer their own building insurance policies, but you don’t have to buy it from your own lender but you have the option of shopping around. The insurance covers you for the rebuilding costs, not the market value of the property.
Association of British Insurers
Established in 1985, the ABI is the trade body for UK insurance companies. It has more than 400 member companies that provide around 90% of domestic insurance services sold in the UK. The ABI speaks out on issues of common interest and acts as an advocate for high standards of customer service in the insurance industry. The ABI is funded by the subscriptions of member companies.