How to buy the Homeowner Insurance Policy you need.

“Sorry mate, that’s not covered.” These are probably the five words every home owner most dreads hearing after a claim, and with insurance being a necessity in the United Kingdom, it is shocking just how often claims are repudiated simply because the peril insured simply isn’t covered. When purchasing insurance it is important to make sure you are buying the correct product for your circumstances, as the onus is on the homeowner to make sure that they have the correct cover. The good news is that there is a product on the market for almost every circumstance; the trick is finding the one that’s right for you.

Though each policy will have its own individual ‘flavour’, most home insurance policies can be divided into two distinct varieties, buildings cover and contents cover. Buildings cover is where people generally make mistakes, the most common one being insuring the building at market value rather than rebuild value. A properties market value generally includes the value of the land the property is built on, which can usually be about a third of the total market value! Obviously, the land does not require cover against theft or accidental damage, so insuring it against these risks can be a costly mistake. Rebuild value also does not take into account the area the property is in. For example, take two identical properties, one in Hampstead and the other in Neasden, both will cost the same to build but very different amounts to buy. This makes the rebuild sum the preferred measure of a property’s value when it comes to insurance. The main hurdle to this is that most people are unaware of their properties rebuild sum, and attempt to guess it based on the market value or the size of the house. This can lead to a situation where the property simply isn’t insured for enough to cover the damages. While the most accurate way to ascertain your property’s rebuild sum is to consult a chartered surveyor, it is possible to work out an approximate amount using a rebuild calculator like the one at www.abi.bcis.co.uk.

In some ways contents cover is even more important than buildings cover. While a major building claim will usually cost more, a contents claim is simply more likely to happen and it is imperative that the correct amount of cover is in place for the correct type of risk. When purchasing contents cover, you will usually be asked to state a value to be insured, which is the maximum the insurer will pay out in the event of a claim. Purchasing the correct amount of cover is paramount as the consequences of under insuring can be dire. While it may seem like a good idea to give a lesser amount, working on the logic that not all of your property will be claimed for at any one time, this action will effectively lower the valuation of your property by the insurer by a proportionate amount. As an example, if you have contents valued at £30,000 but insure only £15,000, any contents claimed on will be valued by the loss adjuster as half their actual value, leaving you to pay the difference! Though it is a rather time intensive process, the best way to do this is to catalogue every item in the house, including items you have made and any gifts you may have received as well, this list should include an approximate date that the items were purchased and any receipts should be kept as well. The time spent will seem well worth it in the event of a claim.

Insurers will often have a limit on the amount payable on a particular type of item when it comes to contents cover and it is important that you check that this is adequate for your belongings. A contents policy that covers bikes up to a value of £250 is no good if your bike cost £1000. If this situation does arise, there are two main options available: You can attempt to negotiate extra cover for the particular item or you can insure that item on its own policy. Another factor to note is that most general contents policies will not offer fully comprehensive cover and will instead have a variety of additional extras to allow you to tailor the policy to your specific needs.

A claim is enough of a hassle on its own, adding the hassle of a repudiated claim to the mix because the peril wasn’t covered is an unnecessary inconvenience. The fact of the matter is; if you research your policy carefully beforehand, you should never hear those five dreaded words; rather you can sit back, relax and know exactly what you’re covered for.

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