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Inadequate home cover puts millions at risk

By MoneySupermarket.com  |  Posted: May 17, 2012

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Millions of Britons are putting their homes and possessions at risk by failing to take out adequate home contents and buildings insurance, according to new research from MoneySupermarket.

It found that about one in 10 (or more than 3million) homeowners are missing out on some form of home insurance by only having either buildings or contents insurance rather than both.

Of these, nearly 1.5million have just contents cover, while 1.3million homeowners only have buildings insurance in place.

Worse still, a further 2% of homeowners - some 650,000 - have no form of buildings or contents insurance at all.

This means they are running the risk of huge financial loss - in many cases needlessly, given the cheap quotes that can be found through MoneySupermarket.

Figures show that the average combined building and contents home insurance policy taken out after shopping around on MoneySupermarket costs just £149 a year, equating to an annual saving of £123.

Peter Harrison, insurance expert at MoneySupermarket, said: "Homeowners without adequate buildings and contents insurance are taking a huge risk by leaving their homes unprotected, and are potentially storing up a financial catastrophe in the event of a major incident, which could even leave them homeless."

What do I need as a homeowner?

If you own a property on which you have a mortgage, your lender will insist that buildings insurance is in place as a condition of the loan. This is to protect the asset against which the loan is secured.

"At the very least, those homeowners with a mortgage on their property should have a suitable buildings policy in place to comply with the terms and conditions of their mortgage agreement," Harrison said.

"Even if you own your home outright, however, it is sensible to have both buildings and contents cover in place, not least because any claims may involve both types of insurance."

If, for example, your home was flooded during a storm, you would have to claim for damages to fittings and fixtures such as electrics or a fitted kitchen through your buildings insurance, while a claim for damage to goods such as televisions and furniture would be made through your contents policy.

Only having one type of insurance could therefore leave you heavily out of pocket. Harrison said: "Although it may be tempting to take either buildings or contents cover, the chances are you may need to make a claim against both of them.

"What's more, taking both buildings and contents cover with a joint policy can be great value for money."

This is because insurers often reward those customers who remain loyal by taking out both home and contents policies with attractive discounts.

Sarah Bailey at the Association of British Insurers (ABI) said: "Some insurers will offer discounts for customers who take out both their buildings and contents policies.

"Similarly, you may be able to save by taking out your home cover with the same company that insures your car."

If you currently have both types of cover, but with two different insurers, you can still take advantage of these discounts by taking out say a six or 10-month policy to realign the renewal dates.

Bailey added: "If you wanted to move your contents insurance, for example, to the same company that provides your buildings cover, but the policies do not come up for renewal at the same time, then the best move is to call the company to find out whether it will offer a shorter-term policy.

"This way you can align the two policies."

What if I am renting?

Homeowners are not the only ones who need home insurance of some kind, and they are not the only ones leaving themselves open to financial disaster either.

The MoneySupermarket research also found that people who rent their homes are taking big risks when it comes to covering their possessions, with a third having no contents cover in place at all.

If their possessions were damaged, destroyed or stolen, the entire cost of replacing them would therefore fall on their shoulders, while incidents that also impact a neighbouring property, such as a fire or a flood, could also land them with the neighbours' costs on top.

Harrison said: "People renting their homes are less likely to require buildings insurance as this is usually taken out by the landlord.

"However, having no contents insurance is a potentially costly and unnecessary risk to take - especially when the average contents only policy bought through MoneySupermarket costs just £85 a year."

What else do I need to know?

To ensure your home and possessions are properly protected, it is essential to get the value of both your property (how much it would cost to rebuild) and your home contents (how much they would cost to replace) correct.

The worth of your contents in particular is notoriously easy to underestimate. Figures showing that, while the average family of four believes they would need £25,000 to replace their home contents, the true cost would be closer to £55,000.

To make life easier, MoneySupermarket provides an

easy-to-use contents insurance calculator. Many insurers provide a minimum level of cover (such as £50,000), but it is worth checking to see you do not breach this amount.

Equally, it is important to check precisely what cover you have. This will ensure that you do not end up paying twice for the same insurance on another type of policy.

Sarah Bailey of the ABI said: "While it is vital to ensure that you have adequate home insurance, it is also important to check that you are not doubling up on - and therefore paying twice for - things such as boiler cover."

"Check your policy document carefully so that you know exactly what you are covered for and what you are not."

If finding the cash to pay for your policy upfront is an issue, remember that you can opt to pay in monthly installments - although you may pay more overall this way.

The way to find the best all-round insurance package for your complete requirements is to visit the dedicated MoneySupermarket home insurance channel, where you'll find details of the cheapest quotes from the market's leading providers.

Please note: Any rates or deals mentioned in this article were available at the time of writing

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