A simple guide for Home Insurance

Transcription

1 A simple guide for Home Insurance Barr Financial Services is regulated by the FSA. FAS no

2 INTRODUCTION Buying a new home is a very exciting time and often certain important things like insurance can be forgotten or left until the last minute. It is therefore important to think about insurance and any other affairs connected to the purchase of your home, especially if you are a first-time buyer, well in advance of becoming the new owner. This guide should help you to understand the different kinds of insurance policies that are connected to buying, owning and paying for a home. The first thing to remember is that you will have made one of the largest investments of your lifetime and you need to protect it. It s also worth mentioning that you should consider protecting yourself from the situation where you are unable to continue to keep up repayments on the mortgage - either through ill health, being let go from work or at worst, an untimely death. See our guide to Life Protection for more information. In this simple guide you will find explanations of the different types of insurance you will require - this is of particular importance to first-time buyers who may be considering this insurance for the first time. TOP TIP Make sure you insure the property from the day you exchange contracts as you are then legally liable for it! 2

3 OVERVIEW OF HOME INSURANCE When you own a new home, it is essential to protect it, and also all your possessions. Home insurance has two parts - buildings insurance and contents insurance. They can be bought separately, though most insurance companies offer a single policy covering both aspects which usually will save you money. Buildings Insurance provides cover for the property itself, including basic essentials such as kitchen and bathroom fittings (sink, toilet, bath etc) and running water. It also provides cover for events such as fire, flood or even subsidence. When buying a home, make sure that your cover starts on the day you exchange contracts - this is because you are legally liable for the building from that date. If you are not a first-time buyer, arrange for your existing insurance to continue right up until the day you exchange, in case the deal falls through. Remember, this is for the buildings part - keep your contents insurance running throughout the moving process. You may find it easier to have your existing insurance policy run until the day after you move - better to be safe than sorry! If your home is part of a larger building, such as an apartment in a block, your buildings insurance is likely to be part shared with across all the properties so you will only need contents insurance. If you have a leasehold property then the freeholder may have insurance and the same rule applies, you may only need contents - best TOP TIP to check up if this is the case. As property values fluctuate so much, it is not always clear how much your property should be insured for. Therefore make sure you only insure what it would cost to rebuild your property -don t forget to include the costs of clearing rubble and architects and surveyors fees, as well as building materials and labour. Remember to insure your property for it s rebuild cost - not the market value! Most people are over insured in this repsect! Check under reinstatement in your survey or valuation details for the rebuilding costs. You can also get a leaflet from The Association for British Insurers (ABI) on how to calculate reinstatement costs, or you can check with your surveyor. 3

4 What If Insurance Is Refused? Properties can on occasion be difficult to insure. This may be due to local area problems such as subsidence, mining or flooding. These issues would probably have been brought up in your survey and if you are raising a mortgage most lenders will insist on insurance being in place before they will release funds on the purchase. It s also worth noting that buying a property with these issues may make it difficult in the future to sell! But if your heart is set on it and the price is right you could always speak to the current owners about who they are insured with. In most cases the existing insurer will continue insurance for domestic use and simply transfer the cover and payments into your name. Legal Expenses Insurance Legal Expenses Insurance is usually part of the cover offered with the buildings insurance. This can be useful as it provides access to private legal remedies for things like nuisance neighbours, disputes over boundaries or a private roadway. Check the premium and the level of cover, although not essential, it could be a worthwhile investment. 4

5 SO WHAT IS CONTENTS INSURANCE? Contents Insurance provides protection for all your possessions inside your home. You may be surprised how much your possessions are worth - even if you are not a big spender, they can be worth tens of thousands of pounds. It may be worth taking a good look around your home, go from room to room making a mental note of everything you have and saying to yourself - If I had to replace everything inside the home after a fire - how much would it cost?. Contents refers to everything from furniture and carpets to jewellery, cameras and clothes. It s up to you exactly what your insurance policy covers and the price depends on how much it covers. The policy will state an overall limit on the amount you can claim, called the sum assured, and there is also a minimum sum assured which is normally in the region of 50,000 although some insurers will quote for less. You can also add accidental damage to your insurance. This covers you in case you damage, drop, smash etc any items in your house - it costs a little more but may well be worth having if you are clumsy or have small children at home. Insurance for items which you take outside your home such as bicycles, musical instruments, sports equipment and so on may also be included in your contents insurance but usually at an additional premium. TOP TIP Watch out for a high excess, it may look like a cheap policy but when you come to make a cliam it could cost you dear! Often this is set up to a general limit per item of 1,000, so if you need extra cover for more valuable items then you will need to ask for this limit to be increased - or you can insure specific items separately. You can also ask for cover to be removed if you do not need it, so check what your policy includes - often standard policies include items like cash and cards left at home and frozen food up to a certain limit in case your freezer breaks down which you may feel are not worth paying for. What is Excess? Most policies come with an excess. This means that when you make a claim the excess is deducted from the value of the claim. So for instance if your excess is 100 and you claim for to replace a TV costing 500 your insurer will only pay out 400. A word of caution: on many comparison websites the excess is set very high to make the policy seem more attractive! 5

6 SO WHAT IS BUILDINGS INSURANCE? Simply if the roof or building is damaged, the insurance will pay for the repair or even the rebuild of the entire building. It also usually covers permanent fixtures and fittings such as fitted kitchens and bathrooms and may extend to pipes, sewers, drains etc. What does Buildings Insurance cover? It covers the cost rebuilding or repairing the house if it is damaged. However depending how the property was damaged will also depend on whether the policy will pay out. You can also add accidental damage to buildings insurance to mitigate the likelihood of a claim not being upheld. Usual examples include of buildings insurance protection: Natural events such as storms and floods Fire, smoke, explosions Vandalism Subsidence Car and lorry collisions Falling trees Water damage from leaking pipes Oil leaking from your heating system Depending on the type of policy you get, it may also cover other structures around the home such as garages, fences, outside walls and driveways. If these are important to you, it s best to check whether they are included. 6

7 GETTING THE BEST PRICE & COVER How do I get the best quote for building and contents insurance? Buildings and contents insurance can actually be quite complicated and with so many companies touting for your business it can some times seem a bit of a maze and a lot of hassle. There are usually 3 main options when considering your insurance; 1) Comparison websites 2) Insurance brokers 3) Individual insurance companies and individual banks. By using the first two you benefit from only having to input your details once, or in the case of an insurance broker actually having someone to speak to and do the leg work for you. The third option, you only get one quote with each provider. So if you wanted a few quotes it could take you a long time. A lot of the bigger companies spend millions advertising on TV to try and catch you at the point when you are thinking about your insurance. Often these are comparison sites but they don t necessarily cover every option for you. The likes of Direct Line and Aviva for example deal directly with their customers but can only offer you their own products, meaning that you may be able to get a better level of cover from another provider that they can t offer. Also be aware comparison sites make many assumptions about you, so make sure the policy is correct and suitable. Also certain assumptions are sometimes made about your property and once the insurer becomes aware of any slight deviation from their norm, they may not cover you or the cover you have may be invalid. Typically this could be if your roof is not tiled, you ve had a recent extension, or the property is listed. Another area to be careful with is excess as some comparison sites automatically default to a high excess to give the impression the quote is cheap. So when you come to make a claim, you suddenly have to find a substantial amount of money first before you can repair or replace the insured item/s. The other area with excess where comparison sites sometimes do, is only showing the voluntary excess and not the compulsory excess too. Again this can give the impression it s a better deal than you may initially have thought. So again watch out for that little trick. 7

8 So how do you go about getting a good deal? Firstly, make sure you are only insuring what you need, no more no less. It can often seem like a good deal to get free extra s, but you are probably going to end up paying for something that you will never need. Make sure you disclose any claims and always be up-front with everything. If you don t you might benefit from a cheaper quote, but when it comes to a claim, the insurance company won t pay out. So that so called cheaper policy was all for nothing. If you have approved locks this will reduce the cost. But the single, biggest factor that will determine any discount on your policy is your no claims discount - this could reduce the cost by up to 20%. Other factors that can have an impact are usually your age, being in a neighbourhood watch area and having approved alarms. Having accidental damage or not can make a big impact on cost, but it might be a price worth paying. If you have young children for example it might be more likely there will be the odd accident in the house and dropping things tend to be an occupational hazard. Having said that even if you don t have children accidental dame can be a benefit. So our advice is to take great care when choosing who to use for your buildings and contents provision. A little time spent at the start of the process or getting help from a broker could ultimately pay dividends in the long run or should you need to make a claim. CASE STUDY - Emma, Essex Home insurance renewal Saved just under 200. Emma received her renewal document from her current home insurance provider and the premium had increased by about 10% to close on 900 a year. She had arranged her mortgage with us and so asked if us to look at her home insurance. We spent 20 minutes going through her particular requirements in detail and finding out exactly what she needed from her policy. We then searched our panel of insurers to secure her the best protection and price. A little later we had a range of insurers for Emma to choose from, each offering a slightly different level of cover. We clearly explained the benefits of each and Emma chose one that covered everything she had requested but also gave her personal possessions insurance away from the home too, something she didn t have before. Emma s new insurance cost a saving of just under 200 with additional protection and a lower excess. 8

9 DO I HAVE TO GET HOME INSURANCE? Technically the answer is No! However if you have a mortgage, the mortgage company insist the property is insured with buildings insurance but remember this needs to cover the cost of rebuilding your home not necessarily the purchase price or valuation (usually lower). It s important to get this figure right so as not to over or under insure this could dramatically affect the premium. Even if you don t have a mortgage it is a good idea as not having it could be an extremely costly mistake should the worst ever to happen. Contents insurance, on the other hand, is an optional extra you either choose to take or not. Often people underestimate the cost of having to replace all their items and possessions and this can be a big mistake and stressful when and if you ever come to claim. There are many levels of contents cover which can prove to be somewhat confusing and being able to discuss this in person with a broker may help you to decide what is right for you. They tend to know the market and what would be an appropriate level of cover for you explaining all the variations and optional extras to cover things such as personal possessions away from the home, pedal cycles, garden cover, high risk items, legal expenses etc. A word of caution is also sometimes known as Buildings and Contents insurance or Household Insurance. Banks often try and up sell this when you are looking to open up a bank account. In recent times we ve even experienced banks trying to sell our clients this even when just paying in money over the counter. Be careful as they may seem to offer a good deal, but remember they can only offer you one option, theirs - and this might not be the best option for you. You will never know of course, because you have only been given the one option. A mortgage broker on the other hand can usually offer a much wider choice from a panel of insurance companies. The advantage here is you can get exactly what you need and you can find the best and cheapest option for you. 9

10 DO COMPARISON SITES HAVE ALL THE INSURANCE COMPANIES? Quite simply the answer is No! They do have a comprehensive list of insurance providers, but they do not have everyone. Companies such as Direct Line and Aviva for example only deal directly with their customers. It is important to be vigilant when choosing your policy and that you look carefully at the detail. Comparison sites often make assumptions, and when you then come to apply for the insurance the company may not insure you. For example if your home is not standard construction or if you ve had an extension, these factors could impact on you getting insured. Also look carefully at the excess on the policy. This is the amount you pay before a claim and can be broken down in two parts; voluntary and compulsory excess. Again some comparison sites set an automatically high excess to show a cheaper premium and draw you in. Also some don t make it that clear what the compulsory excess is and may only show the voluntary excess. Some may show a low compulsory excess but set an automatically high voluntary one that you have to alter - assuming you understand what this means in the first place! So although convenient, comparison sites rely on you being an insurance expert. If you are sure that you know exactly the cover you want, read the small print diligently and have very carefully checked that the policy offered to you fits your criteria or should we say that you fit it then it can be a good way to get your home insurance. On the other hand if you want to be able to speak to someone about your needs, have them guide you through the process, make sure you are only insuring what you require and do all the paperwork for you then maybe you should talk to an insurance broker. 10

11 Jargon buster Accidental Damage (Buildings) Optional cover providing protection for accidents that might damage the permanent structure of your home. For example putting your foot through the ceiling when you are in the loft. Accidental Damage (Contents) Optional cover providing protection for accidental loss or damage to your home contents. For example spilling wine on your carpet or damaging a picture. Construction Type The material used to build the wall of the insured property i.e. brick or other material. Contents Value Cover for loss or damage to the contents in your home caused by a range of events such as fire, theft and flood. Continuous Authority Automatic renew of your insurance policy every year without changing the payment method. Endorsements These change the terms or conditions of your policy, or may give you different cover. Endorsements that apply to your policy will be shown in your insurance schedule. Excess Amount Any excess is the amount in s you pay towards any claim. There are 2 types of excess, a voluntary excess and a compulsory excess. A voluntary excess is selected by you and is in addition to the compulsory excess and a compulsory excess is applied by the insurer (dependent on certain criteria). The higher the voluntary excess you chose, the lower the premium you will pay. Five Lever Mortice Locks/Approved Locks Multi-point locking (on modern UPVC doors where you lift the handle up before locking and bolts come out top, middle and bottom). Patio doors with individual key-operated locks/bolts top and bottom or fitted with multi-point locking. >>> 11

12 Home Emergency 24 hour assistance if a home emergency occurs and you need a tradesman to make your home safe, secure and prevent further damage. You can cover up to 500 to deal with problems such as roof, plumbing and drainage damage, main heating system and domestic power supply failure, plus damage to your home security. Insurance Premium Tax (IPT) A tax imposed on general insurance premiums by the government. This is included in the price of your home insurance. Legal Assistance In many cases this provides 24 hour access to personal legal advice over the phone and cover for legal costs up to 50,000. This could be for help with employment disputes, property disputes, personal injury claims, contractual disputes, motoring prosecutions and tax protection. You may also have cover for the irrecoverable loss of your salary or wages if you attend jury service. Legal Interests Someone who has a financial interest in your property such as a mortgage provider. Listed or Historical Buildings or structures of special architectural or historic interest that is included on a list. If you are unsure, you can see lists covering your local area and obtain copies of individual entries at your local council planning department, County Council offices or at most local reference libraries. Neighbourhood Watch Is the property in an area designated as a neighbourhood watch area by the National Neighbourhood Watch Association (NNWA). Number of Storeys This is the total number of storeys including the basement and any loft conversion. Payment Day The day in the month that the direct debit will be taken on. >>> 12

13 Personal Possessions Outside Home Generally optional additional cover for accidental loss or damage to items that you usually take out of your home. For example: Clothes and personal Items. Camera & Video Equipment. Portable musical instruments. Personal Laptop computers. Camping equipment. (But not whilst in use) Sports equipment. (But not whilst in use) Pushchairs & wheelchairs. Children s electric toys. Telescopes & binoculars. Money. The cover can extend to anywhere within Europe or elsewhere in the world. Usually items worth in excess of 2,000 will need to be listed on the policy. Professionally Maintained Alarm This is an alarm installed by a NSI (incorporating NACOSS & ISI) or SSAIB approved company, and is annually maintained by that company. NSI stands for National Security Inspectorate and SSAIB stands for Security Systems and Alarms Inspection Board. Both these organisations are independent and provide inspection certification services across the security industry. Rebuild Cost Buildings insurance typically covers the rebuilding cost of your home if it is damaged or destroyed by a number of different events such as storm, fire, flood and subsidence. Buildings means the home and its walls, terraces, gates, fences, hedges, paths, drives, hard courts, patios, swimming pools, fixtures and fittings (but not television, radio and satellite dish aerials, aerial fittings and masts), ornamental ponds and fountains, tanks, pipes and cables serving the building for which you are legally liable. The reinstatement value is not the same thing as market price. The reinstatement value is the cost to fully rebuild your home, including site clearance and legal fees. The cost of rebuilding your home varies, depending on where you live. The cost to rebuild your home will be stated on your insurance renewal or policy document. If it is a new property and you have a mortgage it will be stated in your lender s valuation report. 13

14 Note: It is your responsibility to ensure that you are adequately insured. If necessary you should obtain your own insurance valuation from a surveyor. Roof Type Is the roof thatched or standard (standard is any material other than thatch e.g. slate or tile). If the property is partly thatched it should be usually classed as thatched. Ask the provider. Valuables Inside Home Valuables are insured as part of your contents cover up to a limit of 30% of your contents sum insured. You can choose to increase this limit if you need more. Valuables means: Jewellery and watches. Items made of gold, silver and other precious metals. Furs. Pictures and other works of art. Collections of stamps, coins and medals. If you have any of these items that are worth more than 2,000 individually they will generally need to be listed on the policy. Window locks Key operated window locks to all opening windows and skylights. For more information on help with your home insurance visit our website or call Barr Financial Services Bridgeland House, 8 Bridgeland Street, Bideford, Devon EX39 2PZ Tel: Fax: info@barr-fs.com The information contained within this guide is for reference only and should not be used to form any part of a contract. Information is correct to the best of our knowledge at the time of going to press. 10/