No one wants to spend more on home insurance than they have to. Thankfully, there are plenty of clever ways you can save money without sacrificing your cover. It’s important, however, to do your homework. Some widely held beliefs aren’t just misleading, they can actually cost you money.
To help you separate insurance fact from fiction, we look at some of the myths you should take with a pinch of salt.
Myth 1: Insure your house for its full market value
The thought of losing your home in a catastrophic event, such as a fire, may be alarming, but the prospect of not having it adequately insured is even worse. This is why many homeowners go to great lengths to make sure they insure their property for its full market value.
That may sound like the obvious option but, if you choose to insure your home for full market value, you’ll be paying well over the odds for your house insurance premium.
If the worst were to happen, you would only need to come up with the cost of rebuilding the property, which is typically much less than full market value. When arranging your insurance, you need only insure it for the value of the rebuild. If you insure it for full market value, you won’t get more than rebuild value in the event of a claim, so you’ll have spent extra in vain.
Myth 2: You have to take out insurance with your mortgage provider
If you have always rented until now, you may never have had to grapple with how and where to buy home buildings insurance. When you take out a mortgage, it’s often conditional on buying home insurance.
What many people don’t realise, however, is that you don’t have to take out this home insurance with your mortgage provider. Feel free to shop around for a competitive quote. For a small fee, you can get a letter of indemnity to keep your mortgage provider happy. Weigh up how much you could save by shopping around, not forgetting to tot up administrative costs. Typically, you will save a considerable sum by taking out home insurance elsewhere.
Some mortgage providers have in-house insurance advisors, but they can’t stipulate that you buy home insurance with them. That can’t be a condition of the loan, so you are free to find cheaper cover somewhere else.
Myth 3: If you need specialist insurance now, you’ll need it always
Sometimes it’s impossible to get standard home insurance; maybe you live in an area that’s prone to flooding. You’re left with no choice but to seek cover from insurers who specialise in high-risk cases which, as you might expect, tends to be more expensive than a regular policy.
However, underwriting guidelines change regularly, and something that has previously been considered high-risk may over time become acceptable, even if only to a few insurers.
It is worth checking the market when your insurance is due for renewal to see if any standard providers are willing to accept your application. For example, areas that previously flooded but have remained dry for some time, even during wet weather, may find that their homes are insurable once again. Being able to move away from specialised insurance onto a standard policy could yield significant savings.
Myth 4: Home insurance will cover you while you’re on holiday
Few people give a second thought to their home insurance while on holiday, satisfied that it’s in place and all is well. However, depending on how long you’re away, you might find that your home insurance has become invalid.
A fortnight in the sun won’t be a problem, but if you’re away for an extended period, you might no longer be covered. Most home insurance policies have an ‘unoccupied’ clause, which means that if you’re not actually in situ, you won’t be insured. Each policy will define how long it takes for the property to be considered unoccupied, but in some cases, it can be just 30 days. Other insurers allow home owners to be away for 90 days before their cover becomes invalid.
If you plan on being away for longer than a few weeks, check to see that your insurance will continue to be valid. Otherwise, if your home is damaged while you’re away, your holiday could cost more than you had bargained for.
So, as you can see, there are plenty of great ways you can save on home insurance, by shopping around, not insuring yourself for more than is necessary, and even increasing your excess if you can afford to. Do your research, and don’t be misled by the home insurance myths that can end up costing you without offering extra cover in return.
