A Guide to Home Insurance & Saving with Online House Insurance Quotes
For most people a house is their biggest asset and therefore one which must at all costs be protected by adequate buildings insurance.
The Sum Insured
Buildings insurance cover may be quoted either as an unlimited amount, or else quoted every year on renewal as a maximum amount, known as the 'sum insured'. The sum insured is determined in large part with reference to the postcode area in which the house is located. Either way, buildings insurance should cover the total cost of rebuilding your house.
Bear in mind that the cost of rebuilding a house is not the same as the market value of the house which includes the land and its all important location. Rebuilding costs vary in different parts of the country and are also affected by, for example, materials used, such as thatched roofing and whether the property has listed building status. In addition, rebuilding costs should include demolition and site clearance costs as well as architects fees.
Though the insurance provider will calculate the rebuilding cost, or sum insured, it is ultimately the responsibility of the property owner to ensure that the sum insured is adequate. It should therefore be reviewed regularly. The insurance company will increase the sum insured every year by carrying out an indexing calculation.
This can be checked by using the Association of British Insurers (ABI) website rebuilding calculator or by employing a qualified Royal Institute of Chartered Surveyors (RICS) surveyor to carry out a professional evaluation of the cost of rebuilding your house. A surveyor may also be required if the house to be insured is not of 'standard construction', generally meaning brick walls and a tiled roof. Of course, if the sum insured is for an unlimited amount any such calculations will not be required.
Another method of calculating the sum insured used by some insurance companies is 'bedroom rating'. Simply they calculate the likely cost of the rebuild based on the details you supply about the property including the number of bedrooms it has. Note that the number of bedrooms is the number the house was originally designed with, irrespective of what subsequent uses the bedrooms may be put to, such as a study or playroom.
House sellers should keep their insurance cover in place until completion. House buyers must already have buildings insurance in place at the time contracts are exchanged. In the case of flats, the freeholder of the building is often the person or organisation responsible for buildings insurance; the insurance premiums will effectively be included as part of the building's service charge.
In the case of newly built houses, a form of insurance known as a warranty, for example from the National House Building Council (NHBC), covers the property against major structural faults for the ten years following the completion of the house. This warranty stays with the property and is therefore transferable between owners. It should not though be regarded as substitute for buildings insurance.
As with motor insurance, in the event of a claim an excess usually applies. The excess is a variable amount which the policy holder must pay in the event of a claim. As a rule of thumb it can be stated that the greater the excess, the cheaper one would expect the annual policy premiums to be.
Buildings Insurance Cover
Buildings insurance covers the structure and permanent fixtures of the house. The rule of thumb for exclusions is; if you generally take it with you when you move house it is not included. In practice, this means that bathroom and kitchen fittings are covered as are fitted cabinets and cupboards. Everything else should fall under contents insurance.
Buildings insurance should cover injuries to third parties and damage to their property whilst in and around your home. Buildings Insurance policies generally also cover damage to buildings caused by a variety of eventualities, including
- Fire and Smoke
- Lightning and Explosion
- Storms and Floods
- Water Leaks and Oil Leaks
- Riot and Vandalism
- Falling Branches or Trees
- Heave and Subsidence
- Impact from Vehicles and Aircraft
However, it is equally important to consider what is not covered by your buildings insurance. For example any garden or out buildings including garages and sheds may or may not be covered under a standard buildings insurance policy. Driveways, swimming pools, and garden walls and fences will usually not be covered.
Important exclusions will always apply to any house insurance policy. For instance, if a house is deemed to be unoccupied you may not be covered at all. The policy document will state how many days in a row a home may be left before it is deemed 'unoccupied'.
Naturally, insurance companies will not provide cover for damage that occured before the policy was arranged. In the case of rot, whether wet rot or dry rot, this could be specified as an exclusion; meaning you will have no cover whatsoever for this potentially expensive eventuality.
The section of the policy document concerning heave and subsidence should be read with great care to ascertain what exclusions there may be. For example, damage due to coastal erosion; demolition or repair work; and damage due to poor workmanship, design or materials are likely to be excluded.
Subsidence, the downward movement of building foundations, causes cracks in brick and plasterwork, jamming windows and doors, uneven floors and ultimately structural instability. Subsidence claims have recently been increasing, thought to be due to dry summers. Though subsidence is generally covered in all house insurance policies the excess (the amount the insured must pay) can be quite high.
The British Insurance Brokers Association advises that the most predominant causes of subsidence are shrinking and swelling of clay soil; trees near buildings; ground water level changes; temperature changes; mining activity; and, decomposing organic materials. BIBA recommends a full structural survey before buying a house; repairing blocked drains and leaking pipes as quickly as possible; and, refraining from planting trees near to a house and seeking advice before felling nearby trees.
It is estimated that over half a million homes in the UK are in high-risk flood areas. The serious floods of summer 2007 have brought to everyone's attention the importance of buildings insurance that adequately covers flood damage. Indeed with an estimated insurance industry bill of £3 billion many homeowners have seen premiums rising.
It is obviously worth fully investigating the possible risk of flooding before buying any house. There is wide acknowledgement that much of the UK's flood defences are in need of repair or upgrade. Be aware that in the most extreme cases homeowners in high risk flood areas could face raised premiums, higher excesses and even the possibility that their home may become uninsurable.
The Environment Agency produces maps of flood risk areas. If your house is at risk of flooding there are precautions that can be taken to help reduce the impact of flood damage, and therefore also potentially your house insurance quotes. For example, fixing flood skirts to airbricks and doors, fitting one-way valves to drainage pipes, moving electrical sockets higher up walls, and replacing wood and carpet floors with concrete and tile ones.
It is absolutely vital that the insurance company is given the correct details about the home at the time of arranging the policy. The policy documents should be reviewed regularly to ensure that this is the case. The insurer must be notified of any changes; failure to do so is extremely serious as it could invalidate any future claim.
It will be necessary to forewarn the insurer of any changes in circumstances. For example, do tell your insurer about any impending building works to be carried out at the property insured. Notify the insurer of any change in the number of people living in the house and whether they are family members or not. Note that cohabitees are considered as 'family' for insurance purposes. It is also essential to inform the insurer if family members have any criminal convictions or are awaiting prosecution.
Its also essential to notify the insurer before works on any planned building alterations, extensions, loft conversions, basement conversions or a conservatory are begun. Home improvements will increase the rebuild cost and could lead to your home being underinsured.
It is the responsibility of the house owner to maintain the property insured in a good state. Failure to do so could potentially invalidate part or all of any future claim. For example, smoke detectors where installed must be checked regularly to ensure they are functioning. Overhanging and nearby trees may require pruning, lopping or removal, subject to any planning constraints. In short, any damage resulting from the lack of or poor maintenance to the house could invalidate part or all of any future house insurance claim.
When it comes to paying for your insurance you may be given the option of adding the premium to your mortgage balance. This is not a great idea because you will end up paying interest on the premium for the life of the mortgage, usually 25 years.
Finally, the cheapest policy may not always be the right one. Some insurers offer worthwhile extras such as legal cover and the provision of alternative accommodation should the house be uninhabitable. Price is just one of a whole range of factors that should be considered when choosing the appropriate house insurance quote.