Friday, November 23, 2007

Home Insurance

It's always been a good idea to compare home insurance discounts, prices, excess amounts and cover before you buy. But recently, some of the biggest insurance companies have started to identify customers who are “sticky” - people that do not move their business when premiums rise. This means that people who regularly change insurers will get lower renewal quotes than people that don't. In effect, loyal customers are penalised for their loyalty – just like the preferential “new customers only” deals offered by banks. Not taking the time to compare home insurance will cost you...

When you compare home insurance it is important to distinguish between buildings and contents home insurance. Buildings insurance covers the structural components of your property and any outbuildings as well as the walls, roof & doors. Depending on your policy terms, this might include any fixtures and fittings that could not easily be separated (e.g. a fitted wardrobe).

Contents insurance generally covers the items inside and outside the house that you would expect to take with you should you move house (e.g. televisions, beds or garden furniture).

If you have taken out a mortgage on your house, your mortgage lender will insist that you have buildings insurance in place before they will release funds. This is because mortgages are secured against the property, and the mortgage lender needs to make sure that the debt owed to will be repaid even if the building is destroyed. If they didn't do this, the mortgage lender's only option would be to chase the home owner for the value of the outstanding mortgage. It's much easier for them to claim against the insurance.

Your mortgage lender has no financial liability for your contents and will be supremely indifferent if a burglar leaves you with nothing but an upturned box and a deck of cards. OK, not strictly true. Any mortgage lender worth their salt will see this as an opportunity to sell you their contents insurance.

For most people, buildings insurance premiums are largely driven by the cost of rebuilding their property should it be destroyed. Importantly, this amount is not the same as the property's market value, which includes factors such as the cost of the land, location etc. Insuring your property for the market value may result in you paying for more than you need to. To work out the rebuilding cost of your property either check the initial surveyors report (if your home was built recently) or use the rebuilding calculator on the Association of British Insurers website.

Other than rebuilding costs, the major drivers of buildings insurance premiums are geographical factors such as flooding risk or subsidence. Before purchasing a property check out whether it is at risk from these factors by using the Environment Agency's flood risk map. Also, consider getting a full structural survey done.

If you already own a property that is at risk look into what measures you can take to reduce the risk of damage and therefore your premium. Some modifications to consider are;

1. Install valves to prevent sewage flowing backwards.

2. Look into putting temporary flood defences around your property.

3. Ensure documents and expensive or valuable equipment are stored in elevated parts of the property.

4. Move gas and electrical sockets above flood level.

One final point. Some mortgage deals require you to take their buildings insurance as a condition of borrowing the money. As buildings insurance linked to a mortgage is usually relatively expensive it may be that the mortgage deal is not as competitive as it appears. It's long been the case that mortgage lenders offer attractive headline rates by clawing back their profit margin in other areas.

If you suspect this is the case, make sure you compare the Total Amount Repayable from the point of completion to the end of the longest Early Repayment Penalty (ERP) period. This should include the cost of monthly payments, any upfront fees, any mandatory add ones and any fees associated with exiting the mortgage. By doing this you will be able to compare like with like and see who is really offering the best deal. Visit our Mortgage Guide for more information.

Landlords, tenants and students typically have different insurance requirements to home owner-occupiers and so need to consider different factors when they compare home insurance discounts. This relates to the level and types of risk each is exposed to.

Buildings insurance is required by landlords as the owner of the property, but is not required by tenants or students. However tenants and students may want to consider taking out cover for accidental damage. This could protect the deposit in the event of damage to the fixtures and fittings, such as burns and stains on the carpet.

Home contents ownership tends to be split between landlord and tenants in rental properties. Consequently the amount of cover required by each is less than that needed by an owner-occupier. By getting a quote from a specialist insurer both parties should be able to save money compare to a mainstream provider.

Optional extras are available to landlords to reduce the impact of some of the specific risks they face. Rental guarantees provide cover up to a fixed amount in the event of tenants not paying. Emergency calls out services provide cover up to a fixed amount for responding to specific incidents that require immediate attention. Although this will not cover problems caused by a lack of routine maintenance. These are likely to result in an increased premium, so before ticking the box consider to what extent you are exposed to these risks. provides comparison tables containing the best offers on the market. We provide a host of information to enable you to compare home insurance discounts from the leading UK insurers, plus a number of niche providers. In addition you can read our detailed home insurance guide to learn how to reduce your home insurance quote.

Last but not least, to ensure you don't get caught out at renewal time, remember to use the free reminder service at You can set up an email alert to remind you shortly before the renewal date so that you have time to compare home insurance quotes and get another great deal.

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