A house is the single biggest purchase that most of us will make during our lifetime and it is crucial that appropriate insurance is arranged. Yet most people will spend considerably longer choosing the destination for their next holiday than ensuring their family's most valuable asset, and their possessions, are adequately insured.
A household insurance contract can be littered with ‘add-ons' and may seem very confusing. There are a number of pitfalls that can, and do, catch people out.
So, where do you start? It is useful to split your requirements into three components: buildings, contents and personal possessions.
Buildings – how much cover do you need? A popular misconception is that your property needs to be insured for the market value. In fact, it should be the rebuild value. If your house burns down, you don't need to repurchase the land it sits on, you just need to rebuild it - the difference will be significant, meaning a big saving in your premium. The rebuild value will be declared on the survey or you can calculate the value based on the square footage of your property (visit www.abi.org.uk).
Contents- Having considered the cover for the ‘bricks and mortar', you need to make sure the contents within the home are covered – not having them covered could have disastrous consequences. Yet, surprisingly, not everyone has their contents insured – it does not attach to a mortgage requirement and it falls within the ‘it will never happen to me' mindset!
Ideally, you should carry out an inventory of all your possessions, room by room, based on the replacement cost of all your possessions in the event of total loss – you will probably be surprised at the results!
You will also need to account separately for individual possessions valued at, say £1,000 or more - for example jewellery, electrical equipment, antiques etc. These will probably be required to be specified under the policy to ensure full cover is provided. You will also need to consider the value of collectables, such as your extensive wine rack or your CD collection.
The contents section of a policy will normally carry a number of additional benefits, such as liability cover, lock replacement and jury service.
Personal possessions – this will probably be required and provides cover for possessions that you may have with you when you are away from the home such as laptop, jewellery, etc. Sports equipment – such as golf clubs or bikes – is another potential area that people often assume is fully covered but may not be
Having completed your inventory, you can start seeking a suitable policy. Many will provide cover of up to, say, £50,000 of contents; if your contents exceed this value you may achieve better value for money from a mid- or high-net worth contract that will prove to be more bespoke to your requirements. It is not a case of one-size-fits-all and buying off the shelf could turn out to be inadequate
You will also have to decide whether to include accidental damage cover. This comes at additional cost, but will provide cover on buildings and contents should you, for example, spill red wine on the carpet or put your foot through the ceiling. These things easily happen and many people will assume are covered – until their insurers tell them differently at the time of a claim.
Home insurance is available from a range of sources, from your bank and building society to your store cards, the internet and even your supermarket. You would be best advised to contact an insurance broker who will be able to provide advice pertinent to your requirements and who will be able to arrange a suitable contract, meeting all your insurance needs and help you avoid all of those pitfalls.
If you would like more details please telephone us on 01245 260117, email jillb@robjh.co.uk or fax us on 01245 491641.
* Pulse Independent IFA is a trading name of R J Hurst & Partners Ltd, authorised and regulated by the Financial Services Authority (FSA)
