Conal Gregory: Discount rates from the budget insurers not always the best buy

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Your home is one of your most valuable assets and yet so many do not check that it is properly insured, not only in terms of replacing items that are damaged or stolen but that values are kept up to date.

Too many fall for the discount rates offered by budget insurers but a glance at their small print reveals that they are unsuitable for many with too low a single article limit and a high excess, which is the sum the homeowner has to pay on each claim.

Unlike motor policies where a ‘no claims’ discount is standard, few contents insurers offer such a carrot. However, they are clearly aware of careful homeowners and will usually look sympathetically on raising the sum insured.

Do not assume that a renewal invitation is the best rate. Sadly, new clients are so actively sought that they may obtain the best deal. If an insurer is seeking to grow their client base, they may offer a discount on your current premium if they are unable to match it.

Until November 18, Co-op Insurance is offering a £50 food voucher when motor or combined contents and buildings cover is bought (0800 011 3449).

Ask insurers for their settlement policy. NFU Mutual, for instance, pays out on an impressive 98 per cent of home claims excluding those not pursued by the customer.

Whilst a claim will take time, enquire if an immediate cash advance will be made to cover essential urgent expenses.

Ensure applications about your home are correct. Many put their homes at risk because they make inaccurate declarations when applying for insurance. Taking in a lodger or having a property undergoing renovation when non-family members have access need to be declared. Many consumers do not understand the risks and implications of non-disclosure.

Insurers share information and therefore be open about whether a property is unusual, such as a barn conversion or eco-home, as well as if special terms have previously been imposed or insurance refused or cancelled.

Often the fault lies with the insurer, such as not enquiring if a property has previously been flooded. Online purchasing frequently does not allow for full disclosure.

This is where a properly qualified and experienced insurance broker can assist. Not only can they advise which insurers are appropriate for your needs but help you to give the information for an underwriter to properly assess the risk. The British Insurance Brokers’ Association maintains a list to find one close to your home or work.

For an independent analysis of range, look at the ratings awarded by Defaqto.

It is easy to overlook furnishings and other items placed in an extension and so make as full an inventory as possible.

Record dimensions and details such as the specific model of a camera or television. For antiques, obtain regular valuations from a trusted professional such as a leading auction house or a member of The British Antique Dealers’ Association.

Take photographs and keep a set away from the property. In the event of theft, the police can use such evidence as well as the insurer.

Ask if you are free to choose whether an article is replaced or repaired and if the insurer insists on the supplier. Jewellery, for instance, is personal and a good underwriter will not restrict the choice to one jewellery firm.

Halifax and its parent, Lloyds Bank, offer to replace items like a television on a ‘new for old’ basis through a supplier network but customers have the option to receive a cash payment if they wish to source their own replacement.

With policies often offering unnecessary or overlapping cover, such as legal protection, TSB has launched a new, flexible home insurance in conjunction with Aviva that lets customers pick exactly what they wish to insure. Research for the bank, owned since last year by Sabadell in Spain, found that 59 per cent of homeowners would like to tailor cover to suit their own needs.

TSB has no administration fee for adapting cover to suit personal circumstances. For example, it offers to cover student contents when away from home and the policyholder just needs to advise when the student is back in the parental home.

It provides Amazon vouchers to replace lost or stolen gadgets as a fast and effective way to help claimants.

If you are away from home, check the value and length of time that can be outside the property. TSB sets 60 days with its Pick and Protect policy, which is additional to its Defaqto five star rated TSB Home Solutions policy offered in branch. Articles outside the home are covered on a worldwide basis with no time limit by Hiscox with its 606 policy.

For valuables, check on the single article limit and if they need to be specified on the policy. Lloyds wants items more than £3,000 each up to £20,000 to be specified. The total amount for such articles should not exceed £30,000 under its Home Insurance and £50,000 for its Premier policy. TSB’s new scheme has a £3,000 limit.

Hiscox under its 606 policy only wishes to be advised of individual values over £17,500 which rises to £30,000 for fine art.

Pairs, such as antique vases, are often treated in different ways. Under its new plan, Lloyds replaces sets to the value of the contents sum insured. NFU Mutual’s Bespoke policy pays whichever is the lower of restoring a damaged item, allowing for the cost of depreciation, or replacing the entire pair or set.

Alternatively, the undamaged one of the pair can be surrendered and it then pays the full replacement cost of the pair.

Consider adding help for domestic emergencies. A response is offered any time day or night from NFU Mutual. Hiscox pays up to £1,500 under its 606 scheme.

Do not overlook contents in the garden. Cover can be very low with budget insurers but sensibly realistic with high net worth insurers. Expect contents in locked outbuildings and garages to be protected to at least £5,000 and up to £2,000 for a bicycle.

If there is a significant art collection, seek an insurer who has experience such as Covea (formerly Sterling), Oak Underwriting or Hiscox. The latter can cover where a living artist dies which can increase the sum insured by 100 per cent up to £100,000.

Values as well as additional purchases or heirlooms can raise the sum that ought to be insured during the course of a year. Good policies will accept mid-term adjustments with little or no charge.

Conal Gregory is AIC Regional Financial Journalist of the Year.