Home insurance is a generic term for two different products. Buildings insurance to protect the property's construction and contents insurance to protect your moveable household objects and valuables.
Unfortunately, not all home insurance policies are created equal making it difficult to compare like with like. The areas and level of protection offered vary from policy to policy along with the price. So having a definite idea of what you need to insure and for how much will help minimise the overall time and money spent buying it.
STEP 1: Reduce the risk and reduce the cost
All insurance policies protect against the risk of financial loss. So if you take steps to reduce the risk of damage or loss to your property and possessions, you'll be rewarded with a lower premium. Here’s a quick summary of a few of the most effective measures.
- Call your home insurance company or local neighbourhood watch scheme and they will send you a list of steps to take to make your house more secure.
- Fit locks to all windows and level 5 (BS3621) mortise deadlocks locks to the doors. Most insurance companies will give you up to 10% off your contents insurance if you have these kind of locks fitted.
- You can also have an alarm fitted by a recognised alarm fitter, which your insurance company can recommend, and again this can give you up to 10% of your policy. Bear in mind that these can be expensive alarms which could require annual servicing.
- Higher policy excess. Most policies will require you to pay the first £50 of any claim, but if you're willing to take on more of the risk with a higher excess and pay more, your premium will fall.
- Neighbourhood watch. Some insurers still offer a small discount if you live in a neighbourhood watch area; again check with your insurer.
- No claims bonus. Just like your car insurance; a record of no previous claims can reduce your premiums. Some policies now offer the option to protect your no claims bonus. If your NCB isn't protected and you need to make a claim, consider whether it may be cheaper to pay for the loss or damage yourself to prevent a premium increase.
- Your age. Statistically, the older you get, the less likely you are to make a claim. So if you're a lower risk this will be reflected in your premiums. Some companies offer extra benefits to those over 50 such as Saga.
- Extra precautions. Declare any additional safety or security precautions you've made for your property or valuables such as cctv, fire precautions or a home safe for your jewellery etc.
- Your lifestyle. If you have a dog, don't drink or smoke, be sure to declare this as such factors are assessed by some insurers to reduce premiums.
- Applying to your existing insurer as a new customer can sometimes reduce your premiums. Many insurers offer discounts to new customers which won't be repeated when you come to renew.
- If you apply online you will normally get a discount of around 10%.
Before you carry out any security improvements to your home, always check with your home insurance company first. They will confirm which improvements will have the biggest cost cutting impact.
STEP 2: Only pay for what you need
Calculating an accurate figure for the buildings and contents insurance value can be awkward, which is why a lot of homeowners are either under insured or paying for levels of cover they don't really need.
Buildings insurance covers the re-build cost of your property not its market value. The re-build value of your home is the cost of re-building it in the event that it is destroyed by fire or subsidence for example. The re-build value of your home can usually be found on your mortgage agreement, or property deeds. The Building Cost Information Service (BCIS) of the Royal Institution of Chartered Surveyors (RICS) produces a range of detailed guidance on the cost of rebuilding houses and flats together with a re-building cost calculator. Alternatively, you can opt for a policy that has an unlimited or high standard buildings sum insured so you don't have to be concerned about insuring the right amount.
Contents insurance covers almost everything else you would take with you if you moved house. Make a list of the rooms in your house and write down all the items contained in each with its value. Once you've done this, total the individual amounts to see what contents insurance protection you need. Remember to value items such as CD's, videos and clothing as their collective cost is often under insured. Whether your wardrobe is full of jeans or designer labels, make sure you include the cost of replacing them.
STEP 3: Consider separate policies
If you need both buildings and contents insurance, get quotes for separate policies for maximum potential savings. Most insurers do provide them as separate policies and just because one is cheap for buildings cover doesn't mean they are equally competitive to insure the contents. Find the cheapest providers for each component and consider buying each from different insurers.
STEP 4: Shop around and save
As with any other product, the biggest savings are revealed by shopping around.
Firstly, don't simply opt for the home insurance supplied by your mortgage lender. They can be convenient when your busy sorting your mortgage but they're often over priced and chances are they won't have been compared against other policies on the market.
When shopping for insurance you basically have three options; go direct to the insurer, browse the web or use a broker. If you have the time and commitment you can do all three, but the fastest and most effective route is to log on and use the reach of the internet.
The most powerful and timesaving websites compare dozens of brokers and home insurance companies in minutes. You only have to fill in one form to get a list of premiums displayed on your screen from major insurers and brokers. However, if you have unusual or very specific requirements the final premium may increase when confirmed direct with your chosen insurer. Some of the best home insurance comparison and broker sites are:
STEP 5: Haggle
Like every other product, insurance has a margin of profit built into it which can be negotiated down if you're armed with the right information. Not every insurer will buckle and concede an additional discount but if you don't ask you won't know.
- Firstly, find the cheapest quote after using internet comparison sites and phoning a few brokers.
- Take the cheapest quote and contact your existing insurer first asking them to beat it. If they won't budge contact the second cheapest insurer and do the same.
- If after all that the insurer won't cut the premium, ask them to throw in some extra cover to sweeten the deal or move on to the next home insurance company.
PLEASE NOTE: The guidance published in this article is for information only and does not constitute financial advice or a recommendation of any particular home insurance policy or company. If you are in any doubt please consult an independent insurance adviser. A database of advisers in your area is available at www.unbiased.co.uk
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