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Home Insurance, Do You Need It?

Ignoring the requirements of mortgage companies who want to protect the money they lend; it is not a legal requirement in the UK to insure your home.

If your home has a mortgage, then the majority of lenders make it compulsory that the property has buildings insurance coverage. At the end of the day, even without a mortgage, you want to protect your home from risks like fire, storms and floods particularly with climate change and unpredictable weather never far from the news.

Buildings insurance will cover the cost to repair damage to your home or rebuild the structure. The structure includes walls, roofs, windows, outbuildings and, something a lot of people don’t realise, fitted kitchens and bathrooms.

However, buildings insurance does not provide cover for the items inside your house like furniture, carpets, personal possessions, clothes and electronics. These need to be covered with a separate home contents insurance policy.

Is Contents Insurance Worth the Cost of the Premium?

Recent research from HSBC Life has found that following a survey of 2,000 people, 30% of people say home contents insurance is expensive and as a result may cancel their insurance policy. Another key reason given to avoid taking out a policy is just sheer confusion when faced with all the products on offer in the marketplace.

However, for every denouncer, there are more than enough people who say that home contents insurance gives them peace of mind, a total of 41% in the case of the HSBC Life survey with a further 49% saying it is necessary to protect household contents.

How to Find the Right Home Insurance Policy

With data suggesting that the average person spends up to an hour looking at different home insurance policies, it’s not a quick fix to research and buy a policy.

60% of people in the HSBC Life survey used price comparison websites to take the legwork out of the research but price comparison websites don’t have every insurer and tend to be cost-led. It’s easy to miss something in the small print or not understand what you are buying. Just under three-quarters of people surveyed were driven by price rather than the quality or scope of the cover.

The key when comparing policies whether you use a price comparison site or not, is to make sure that you are comparing like with like. Policies can be cheaper because certain items are not covered. Once you have found a policy with the right price, make sure the premium covers everything that you would like insured in your home.

If you have specialist items like paintings or high-value jewellery, then it may be worth talking to an insurance broker who can filter the market for you and find the right policy for your needs.

There is no ‘right way’ to find home insurance, it’s whatever suits your needs and available time. Whichever way you source a policy, always read the fine print to make sure it covers your needs and the possessions in your home.

Understanding What you have Bought

Around three-quarters of people say they understand the policy they have bought. If you have never made a claim before – and around half of the policy-buying public have not – then it is also important to take sometime to understand the claims process. Many people ignore their home insurance for years and only really learn what happens when they make a claim.

Claim experience pertains to that insurance company’s reputation which is usually based on the process and how quick and efficient it is and whether a claim was covered. An insurer can incur a black mark if they don’t pay out, but this could just be because the insured was not covered by the policy and hadn’t read the small print. Always take online reviews with a pinch of salt.

Debunking some Common Insurance Myths

  • My contents cover will insure all the items in my home – theoretically, yes, but most insurance policies have an individual item limit so if you have unusually expensive carpets or curtains, then these will not be covered for their full value unless they are declared separately on the policy.
  • My home insurance covers damage caused by pets – standard insurance policies do not cover damage caused by pets and also damage caused by unknown or unwanted furry visitors such as mice or other vermin.
  • I live in a high flood risk area so won’t be able to find affordable home insurance – it did use to be the case that insurers charged high premiums or simply didn’t offer cover for homes in high-risk flood areas, however, now the government has stepped in with a scheme called Flood Re. Flood Re aims to offer insurance to homes in areas where the risk of flooding is exceptionally high.

Final Thoughts

Price and quality of cover rank fairly evenly amongst those buying home insurance cover, these are certainly the two twin drivers when it comes to choosing between policies. Reputation matters too and is usually based onthe claims handling process, how smooth this is and the perceived likelihood of a claim being successful.

There are budget policies available in the marketplace but just check they work for your home. When it comes to home insurance, the old adage of, ‘you get what you pay for’ can certainly ring true.

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