Understanding coverage terms essential to benefit from home insurance says expert

Many householders have been looking to cut costs because of job losses and wage cuts resulting from the coronavirus pandemic – and one of the financial outlays that some may consider dispensable is the safety net of home insurance.

The cost of insurance has risen 0.5% over the last three months, according to financial services researchers Consumer Intelligence (consumerintelligence.com), which says the average annual buildings and contents insurance policy now costs £151.(€167)

And because so many more people have been working from home since the pandemic started, one in seven homeowners (14%) are considering cancelling their contents insurance, as the burglary risk is lower.

However, although there’s less chance of homes being burgled because people are in them all the time, experts say the chances of making a claim for accidental damage has increased. After all, the longer you’re at home, the more chance there is you’ll break something.

But if you do submit a claim on your home insurance, research by the  Association of British Insurers (ABI) (abi.org.uk) shows one in five claims are unsuccessful, mainly because people don’t really know what they’re covered for.

The ABI says most problems could be avoided by better understanding of what is and what’s not covered, and Sarah Brodie, the ABI’s policy adviser for property insurance, says: “When buying home insurance, it’s important to get cover that meets your needs. Consider the risks you want to protect yourself against, the value of your contents and the amount of excess you want to pay if you need to make a claim.

“Home insurance provides peace of mind and is vital for protecting you against everyday risks like theft, fire and burst pipes. There are lots of home insurers available on the market so once you know what you want to be protected against, shop around to get the best deal possible.”

Here, Brodie answers common questions about home insurance in the UK and Ireland.

1. If I buy home insurance with a cheap provider I’ve never heard of, are they much less likely to pay out on claims?

“It’s important to get cover that meets your needs – this isn’t always the cheapest available. The home insurance market is competitive, with many providers that pride themselves on paying out claims and good customer service. If you’re unsure of the credentials of the insurance provider, you can check if they’re regulated by the Financial Conduct Authority (fca.org.uk)  (FCA), or the Central Bank of Ireland (centralbank.ie/regulation) in Ireland. Firms regulated by these authorities are subject to strict regulatory requirements on how they handle customer claims.”

2. If I accidentally get details (like the type of door locks) wrong on my application form, will an insurer refuse to pay a claim? 

“When applying for home insurance it’s important to fill out information honestly and provide information to the best of your knowledge. If you find you have accidentally got some of the information wrong, you should contact your insurer straight away. They’ll be able to update the information on your file.”

<figcaption class='imgFCap'>(iStock/PA)</figcaption>
(iStock/PA)

3. How much do premiums tend to go up if you make a claim? Is it sometimes not worth claiming because the premium will go up so much if you do?

“Insurers will take into account a number of factors when determining a customer’s premium, this includes factors such as claims history, rebuilding cost, crime rates and flood risk. Having previous claims doesn’t automatically mean you’ll pay more for your cover.”

4. If I nip out for five minutes without locking the door or windows and someone steals something from my house during that time, is my insurance invalid?

“If your home has been burgled because you left your house without locking the door, then your insurance cover may be invalidated. It’s important to always make sure your house is secure before you leave. This includes checking all windows and doors are locked.”

5. If I feel my insurance company isn’t treating me fairly or is refusing to pay a claim, can I appeal against their decision? 

“Each insurer will have a set procedure for making a complaint. If you’re unhappy with how your insurer has treated you, the first step is to make a formal complaint with them in writing. If, after following this process, you’re still unhappy, you can take your complaint up with the  Financial Ombudsman (financial-ombudsman.org.uk) in the UK, or the Financial Services and Pensions Ombudsman (fspo.ie) in Ireland, who will independently review your case.”

6. Does it make any difference to my insurance premium if I live in a Neighbourhood Watch area or have a house alarm?

“Insurance premiums take into consideration a broad range of factors. While location, including crime rates, is considered, there are several other factors that will also be taken into account. Insurers often use information on how secure a property is when they are deciding whether to offer cover, and what premium to charge. Improving the security on your home, such as fitting alarms or high security locks on windows, can help make sure you get the best possible deal when you buy or renew your cover.”

7. If the house alarm isn’t switched on or is broken and there’s a burglary, will my insurer refuse to pay out?

“Some customers may be asked by their insurer to meet minimum security standards to minimise the risk of theft. If your insurer has required you to introduce minimum security standards, they may not provide any cover for theft unless the appropriate security devices are properly fitted and used.”

8. If we spill something on the carpet and ruin it, will my insurers only pay out if we have accidental damage cover?

“Accidental damage cover is usually not included as standard in home insurance policies. You can extend your home insurance cover to include accidental damage which will protect you against damage resulting from everyday household accidents like breakages and spillages. You can also purchase additional cover for your personal possessions to protect items that may leave your household such as your mobile phone”

9. Do I need to keep receipts for everything?

“It’s good practice to keep a file of photos and receipts of expensive purchases. This allows you to calculate the total value of your contents and is a proof of purchase if you need to make a home insurance claim.”