There are two kinds of household insurance policy. Buildings insurance covers the structure of the home together with its fixtures and fittings. Contents insurance covers the contents of the home which you would take with you if you moved. As well as covering you against a stated list of risks (including, for example, fire, subsidence, theft, flood and storm) both kinds of policy provide an important “liability” section. This pays for amounts of money for which you become legally liable.
You don’t have to insure your contents and buildings with the same insurance company. The household insurance market is very competitive and it is always worth shopping around. However, using the same company may help to streamline claims handling if you suffer damage to the buildings and its contents.
Many people buy their buildings insurance policy through their building society or lender when they take out their mortgage. Having a suitable insurance policy is a condition of the loan. You do not have to take out your policy with your building society or lender, unless you have agreed to a special mortgage package which includes insurance.
Otherwise you can buy your insurance elsewhere but a small charge is sometimes made by building societies and lenders. This is because they have a bulk-buying arrangement with many insurers which streamlines their system. If you do arrange your own “one-off” policy then servicing costs will be higher for the society.
The “sum insured” is the maximum amount the insurance company can pay you. It must be the full re-building cost of your property. The market value or the council tax valuation band is not an accurate guide to the rebuilding cost. If your house is built of brick with a tiled or slated roof, the ABI information sheet “Buildings Insurance for Home Owners” will help you to work out a sum insured.
Remember, it is your responsibility to get the sum insured correct. Any significant under-insurance could mean that your claim might be reduced or even rejected altogether.
Your contents insurance policy covers the contents of your home against risks which are set out clearly in your policy booklet.
Contents policies also have other valuable sections such as liability insurance, legal expenses and freezer contents. To have these sections may require an extra premium.
It can take a few hours to estimate accurately the value of your possessions.
A wide range of contents policies is available. The cheapest of all is the “indemnity” policy. This takes into account, when paying your claim, the amount for wear and tear. So, if your five year old three piece suite was ruined by leaking water, the pay-out would reflect the age of the suite.
Costing a little more is the “new for old” policy. With this policy you will be paid the full cost of a brand new suite to replace the five year old one.
Over the last few years a new kind of policy has become popular. This policy has a premium which is calculated on the number of bedrooms in your home. There is no need to work out the total value of your possessions.
Insurance companies have to make sure that premiums match their claims experience in your particular area. Your postcode is therefore important both for buildings and contents insurance. Insurers may find that your postcode area is more prone than others to subsidence damage, or the losses from theft or winter weather. Have a look at the insurance companies’ brochures… they often list their premiums for individual postcode areas.
With many policies you can pay installments – you must be keep up the payments or cover will stop. Some insurers operate a no-claim discount system when policies are renewed with them. Check on your renewal notice to see if this applies.
The risks for which you are covered are listed in your policy. If you want to widen your cover to “accidental damage” then an extra premium will be payable. Under a conventional policy (“indemnity” or “new for old”) your carpet, for example, would be covered if it were burned, damaged by flood or leaking water or ruined by malicious vandals. You would not, however, be covered if you spilt a tin of paint on it. This is known as accidental damage and can be a valuable extra protection.
“All Risks” is cover for items which you regularly take out of the house, binoculars, cameras etc. These can be listed in the policy under an “All Risks” section, again an extra premium is payable.
Householders – like everyone else – have a duty to exercise reasonable care in everything they do. If you are careless or negligent, and injury or damage results to someone else or their property – then you could be held “legally liable” – perhaps for a great deal of money. Contents and buildings policies cover you against this risk. The buildings policy covers you as owner of your home while the contents policy covers you as its occupier.
The unthinkable has happened and you have to make an insurance claim. What to do next?
All insurance policies spell out clearly the risks they cover, and which risks are not covered.
Read your policy and make sure that the loss you have suffered is covered by your policy.
Decide which policy, buildings or contents, to claim under. A good general guide is that your buildings policy covers the structure of your home together with any fixtures and fittings and internal decorations. Your contents policy covers possessions which you would take with you if you moved.
If you are not sure, telephone both insurance companies for advice. Your policy booklet gives you a contact number.
Ask your insurance company, building society or insurance adviser for a claim form.
Complete the form as soon as possible and return it with, if possible, estimates for the cost of repair or replacement.
If you have a “replacement as new” policy you can claim for the full cost of repairing your property or replacing it with new items if they’ve been stolen or destroyed.
If you have an indemnity policy then you must deduct, on your claim form, an amount to represent wear and tear.
If you find it difficult to get estimates quickly (if damage is widespread builders and plumbers may be hard to track down) then send the claim form to the insurance company straight away, and tell them you will send estimates as quickly as possible.
If you have suffered from theft, malicious damage or vandalism, tell the police immediately.
If you have lost credit cards or cheque cards, tell the company that issued them immediately, a delay of even a few hours could prove expensive for you.
If temporary repairs have to be done to prevent further damage, arrange for the work to be done and keep bills. The cost may form part of your overall claim.
It is important to keep damaged items because the insurance company may want to see them. Burnt or soaked property can be kept in a shed or garage.
As soon as the insurance company gets your estimates it will either:
- Pay your claim.
- Arrange for a claims inspector to call on you.
- Send a loss adjuster to handle the whole claim.
The claims inspector is employed by the insurance company and will arrange with you the basis on which your claim will be settled.
Loss adjusters are independent experts with a good knowledge of the area in which they operate. They are skilled in assessing claims and in advising on the best repair and reinstatement methods. They will recommend to the insurance company the way in which your claim should be settled.
There is usually no need for you to appoint someone to act on your behalf. If you do, remember you will have to pay their fees yourself.
Insurance companies usually want to see evidence of ownership and value of property which has been lost or damaged. It is important to keep, if possible, receipts and professional valuations. If you do not have these, ask the insurance company what other evidence they will accept.
Many insurance companies provide telephone helplines for policyholders facing an emergency. They can give you the names of good tradesmen for emergency repairs and, of course, give detailed advice to those having to make a claim.
Some insurers require the installation of approved alarm and/or minimum security fittings. Check whether this applies. You may qualify for a discount from the premium if you already have good security.
Modern insurance policies are easy to read. There is no “small print” and many of them have won plain English awards. Read your policies NOW. Then clear any particular points with your insurance company or insurance adviser. Then you will have peace of mind.
This document is reproduced with the permission of ABI – The Association of British Insurers.