Insurance and the value of advice

Home insurance – getting the cover you need

Insurance and the value of advice

We’re all experiencing new and varying challenges that COVID-19 has brought to many aspects of our lives – not least our finances.

Cutting costs has been and will probably remain a priority for many of us and insurance can often be seen as an unnecessary expense – or at least one where it’s believed that costs can easily be reduced. This line of thought is particularly true with home buildings and contents insurance – but there’s a real risk involved in opting for a “cheap and cheerful” policy that is purchased without any advice.

Switching to a low-cost home insurance option without any advice being sought or guidance given with regards to the amount of cover you need can leave you significantly out of pocket. It may seem simple to reduce your cover to reduce your premium. However, the risk of being underinsured can be extremely costly.

And unfortunately, underinsurance only usually comes to light when you come to make a claim and discover, to your detriment, the effect this has on the amount paid out by your insurance provider.

If your home insurance doesn’t have the right sums insured, your insurer can reduce any claim made via the level of your underinsurance – commonly known as ‘the average clause’.

An example of how the average clause could affect you:

  • You have £50,000 of home contents insurance cover.
  • The actual value of your contents is £100,000 – therefore you are only insured for 50% of the true value.
  • An escape of water/burst pipe causes damage to your property and you claim for £20,000 of damage. As you are underinsured by 50% it is likely that your insurer will only pay out 50% – i.e. £10,000. This means you could end up £10,000 worse off.
The simplest way to make sure you have the right home insurance cover in place is to speak to an expert insurance broker.

Understanding the cover you need for both your home buildings and contents insurance is vital – and this advice is not always available when taking out a policy online.

Examples of the common areas for underinsurance are:

  • A specified item, such as a high value piece of jewellery or art has not been valued for a while and remains on the policy schedule at each renewal for the same amount. Even if your policy has the benefit of index-linking, this may not be sufficient in keeping up with market values.
  • You’ve undertaken some home improvement work, such as an extension or loft conversion but haven’t’ thought about your home buildings insurance sum insured. Again, index linking may apply, but often this will not be enough to account for the increase in rebuild value. Reinstatement following a total loss such as a fire could therefore find you having to dig deep into your savings if the sum insured is found to be less than it should be.
Not all home insurance policies are the same.

Home buildings and contents insurance policies have changed considerably over recent years, with many including additional features and cover that lower cost alternatives might not.

Home cyber cover has perhaps become even more relevant now as many of us are continuing to work from home – and therefore increasing the risk to our own personal computers and home networks.

Other benefits that can now be provided by home insurance policies include:

  • ‘All Risks’ worldwide cover, including theft, accidental loss and damage.
  • Specified cover for individual items guaranteeing you a speedy settlement, without quibble, following damage or a loss.
  • Cash or replacement option allowing you to replace an item with something similar from your own supplier or keep the full cash settlement.
    Cover for second/holiday homes – in the UK and abroad.
  • High single article limits for valuables including jewellery and watches.

If these features are relevant to your circumstances – does your current home insurance policy provide them?

Getting the right advice

An independent insurance broker can talk you through the insurance options available to suit your needs and your pocket.

Rather than using an internet comparison site, seek advice from someone that knows and understands the insurance world – and is willing to take the time to understand your individual needs.

Talking to FOCUS costs nothing more than the cost of a phone call – but could save you thousands.

We’re here to talk to you in person – not via web chat and we’re not a call centre. We work with our clients and build a relationship that lasts. We’re on hand to provide advice, answer your insurance-related questions and adapt or change your insurance arrangements as your circumstances dictate.

Quite simply, we’re here to help. Find out how you can benefit by talking to our friendly team of experts today.