Last month we explored the growing issue of underinsurance in terms of insuring your home and contents for a lower amount than they are worth.
Considering that most homes have an average of around £30,000 of contents, it could prove to be a costly mistake to underinsure, or not insure contents at all.
Even worse is not insuring the biggest investment of your lifetime – your home. This could leave you in dire straits if it was destroyed in a flood or fire while still paying the mortgage, losing your possessions, and likely also paying for somewhere else to live.
Many UK homes are underinsured without realising it, because the value of your home is far less than the cost of rebuilding it – which would include excavation and all the professional fees that come with the process. The price of materials has also risen sharply due to supply chain issues, and energy costs have caused the production costs of materials to rise – all of this in addition to general inflation.
To put it into context, if you needed to rebuild your home, the steels alone have increased in price by 54% over the last year.
While underinsurance is a big problem in the UK, there are other reasons why an insurance claim could be denied which we hope will prevent some heartbreak.
We talk Eric Juster, Branch Manager of A-Plan St Albans about some of the additional pitfalls to avoid.
You cancel your home insurance policy
Rising costs have led to many cancelling insurance policies they feel they can no longer afford. The effect of cancelling home and contents insurance can be devastating to homeowners – and tenants – in the event of a claim, who could end up unable to replace not only their personal possessions, but the fixtures, bricks and mortar they call home.
Worse still is that, by the time you need to claim, you may have forgotten you had cancelled it. It does happen.
In 2021, Finder.com reported that more than 25% of UK homes don’t have any home insurance – yet the average home has contents worth in excess of £30,000.
While it can seem a quick fix to cancel your policy due to inflation, inflation also means that the costs of replacing everything yourself has risen as well – could you afford to replace your possessions with inflation rising to 11% this year, and some items rising in price by as much as 30%?
Eric confirms, “We fully understand the financial pressures many are under. If you find yourself in this position, just pick up the phone. We can talk it through and help you make sure that you aren’t overpaying on your cover, as opposed to cancelling it outright.
It is important to consider the severe implications cancelling could bring, and the sheer expense faced afterwards in rebuilding your home, and your life.”
Your home has degraded or been damaged over the years
Maintaining your home over the years is essential! Damage that is not repaired and left to worsen over a period of time, such as water leaking through a crack in the roof, which causes mould or other structural deterioration to occur would not be covered by your insurance.
Eric and his branch advisors are keen to remind clients, “Many may not realise that it is the homeowner’s responsibility to perform regular maintenance to ensure that the building is structurally sound.
“Here’s an interesting statistic, courtesy of finder.com: £1.8 million is paid out every day for ‘escape of water’ insurance claims – so if you are correctly insured, claiming correctly and in a timely manner is also a hugely important part of maintaining your home and repairing any damage quickly.”
The value of your insurance claim is below the policy excess
Some homeowners choose a higher excess in order to lower the cost of their premium. However, one of the main reasons that claims are rejected is that the value of the claim is below the policy excess.
For example, if you were claiming £350 for a stolen TV but your policy excess was £400, then it wouldn’t make sense to claim. However, if the value of the item stolen was £1,000, this would be more than your excess and your home insurance claim would be worthwhile.
Eric confirms, “We often talk to clients about the sliding scale of an excess versus what they can afford. It’s important to understand that a high excess could certainly help to reduce a premium, but would it cover them if they needed to claim for something at a similar price to a higher excess? When insurance is bought online without advice, it can be unclear as to what the higher excess impact could really look like – whereas it’s our job to make this very clear.”
Homeowners aren’t sure what is covered on their insurance policy
It is important when taking out a home insurance policy to carefully read the terms and conditions and understand what is and isn’t included. Some homeowners may believe that any damage that occurs to their home is covered by their policy—unfortunately, this is an inaccurate assumption.
For example, a standard home insurance policy generally does not include accidental damage.
Other common things that might be missing include gadget cover and cover for items used outside the home. You may also want to check any single item limit, such as a valuable piece of jewellery or a piece of art.
Eric confirms, “This is where using a broker like A-Plan can really help – we take our time in understanding exactly what is needed, and ask more questions than you would typically see on a comparison site.
We also do this in person or over the phone which means that we are here to answer any questions as we go through the process – and even help in the event of a claim. This helps our clients to make an informed choice, which can mean that they don’t end up worse off by trying to cut corners – or even overpaying on their policy.”
Avoid costly home insurance mistakes
Our branch advisors are here to help! They will advise you on the best ways to tackle your home and contents insurance, and discuss your concerns to give you peace of mind.
They can help you list all of the valuables in your home, and ascertain rebuild costs so that you get a true picture of costs to replace everything should the worst happen, allowing you to make your own mind up about whether to cancel that policy, or not.
Find your local branch here – don’t forget you can pop in and speak to us, or just pick up the phone to speak with your branch advisors directly.
Sources: AXA, Construction News, Finder.com