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Home and Contents Insurance Guide

How much cover

The sums you insure for are generally based on two approaches: “bedroom-rated” or “sum insured”.

Bedroom-rated policy: your premiums are based on the number of bedrooms in your house, although it does NOT restrict claims to the value placed the rebuilding cost of an individual room or replacing its contents.

Generally, though not always, the valuation is generous enough to ensure that that you are amply covered. However, such policies are sometimes slightly more expensive.

Sum-insured policy: you have to calculate the value of your home and its contents yourself. The advantage is that you set down exactly how much all your possessions are worth, the potential rebuilding cost and the replacement of fixed items.

The disadvantage is that the process is, initially, more time-consuming. Also, you risk under-insuring your home: any claims may then be scaled down by the proportion by which you are unprotected.

For example, if your home is worth £200,000 and you only insured it for £100,000. A fire then causes £100,000 of damage. Your insurer will only pay out £50,000, half the cost of the policy. This is because you only insured for half the value of the house.

How to cut the cost of cover

• Generally, you pay the first £50 or so of every claim yourself. This is a “compulsory excess”. You may also have the choice of higher excesses. In return for which, the insurer will reduce premiums

• Don’t claim. No-claims discounts are becoming increasingly common

• As are “loyalty discounts” for staying with an insurer for a long time. But don’t ignore that fact that shopping around may be cheaper

• Don’t ignore insurance brokers. The internet is often very cheap, but many brokers can offer policies that are just as competitive, as well as more closely matching your specific needs. Moreover, with brokers you can often get them to cut the cost of their quote by telling them that you have obtained a cheaper one elsewhere - they simply sacrifice some of their sales commission. Don’t try to lie, however: they know the “real” cost of cover and they will simply send you on your way.


More pages

Page 1: Introduction
Page 2: How much cover

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