Mortgages & Home Finance Home Insurance: Are You Covered?

Date Published:

10/09/2009

Amazingly, 40% of us choose not to have home insurance - and those of us that do may not be adequately covered. Since insurance covers us for everything from burglarly to floods, this is clearly madness. So, just how well is your home covered?

By Caroline Bloor

Price comparison website www.moneysupermarket.com reported a 300% increase in applications for cover after last summer’s floods. Even a few inches of flood water can do considerable damage. The typical insurance claim after a flood is £15,000 - £30,000, compared to just £1,070 for the average burglary claim.

And, whilst buildings insurance is compulsory for homeowners, 40% of us elect not to have home insurance, says the ABI. It is estimated that more than 900,000 homes on flood plains are without cover. What's more, many of the householders who do have buildings and contents cover are actually under-insured - so are unable to claim for the full value of any damage to their properties. So, how do you get it right?

Buildings Cover

Whilst buildings insurance is compulsory for mortgage borrowers, it’s possible to be caught out and end up under-insured. The cover is based on the cost of rebuilding your home if it is reduced to rubble and is therefore driven by floor space rather than the property’s current market value. So any changes to your property such as building an extension or changing the layout to create more rooms can have an impact on your cover. Always tell your insurer if you’ve had work done.

You can use the ABI’s rebuilding costs calculator to check if the sum you have your home insured for is adequate. Or you can commission a surveyor to make an assessment. Otherwise, if you are underinsured and need to claim, you may find you are not covered for the full amount. For instance, your property’s rebuild cost is £100,000, you’re only insured for £75,000, but you need £50,000 to repair flood damage. Your insurance company might only pay out half and you’d have to find the rest yourself.

Contrary to popular belief, you are not obliged to buy your buildings insurance through your mortgage lender. Shop around and you may be able to get the cover for cheaper.

For More Information

A Guide To Buildings Insurance
A Guide To Contents Insurance
Self Build Insurance
Insurance & Working From Home