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.
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: Unlimited cover isn’t always comprehensive
If you’re keen to make sure all your belongings are insured and want to eliminate any chance of inadequate cover, you may well opt for unlimited cover. This probably sounds like the best option, particularly if you have lots of possessions, but you might be surprised to learn that unlimited doesn’t always mean unlimited.
Although unlimited cover will certainly cover a generous number of items, if you have something particularly valuable, you may find that it’s not included. Many insurers specify a limit, and any single item that exceeds that limit will either be excluded from the cover, or only partially covered.
Should something happen to one of your prized possessions, if you don’t have Specified Possessions Cover, you could lose a significant amount by assuming that unlimited cover will fit the bill.
Unlimited cover can also cost you by being unnecessarily expensive. If you don’t have lots of possessions, a standard home insurance policy should be enough.
Myth 3: You will have to take out separate cover for accidents
One of the biggest causes of damage to the home is an accident of one kind or another, but many people are under the impression that special cover is required to make a claim. Accident cover for home insurance is often sold separately, so people often believe that their base plan won’t offer any cover.
It’s important to check the terms and conditions of your home insurance, as providers can differ on this. Some insurers, for example, automatically include accidental damage to electrical items in their standard home insurance. This means that if your computer is smashed, you may be able to claim.
Standard accidental damage insurance usually has limits but if you’re mainly concerned about electrical items, such as your TV or computer, you could well discover that you have everything you need without paying for extra cover.
Myth 4: 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. Weight 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 5: 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 6: 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.
