Don't buy house insurance on just price, check what's covered

From accidents and water damage to theft and subsidence, your home is at risk every day and yet so little attention is given to protecting it. Good insurance is vital to safeguard a property which is probably the most valuable single purchase you will ever make.

under threat: Less than 40 per cent of those at a significant risk of flooding are aware. Picture: Ceri Oakes

Buildings insurance is fantastic value. According to the Association of British Insurers (ABI), the average annual premium is just £268, which equates to £5.15 a week, whilst the average subsidence claim has rocketed to £6,300.

Sometimes the most unexpected problems can occur. There is a gypsum-rich seam which runs from Doncaster to Hartlepool, causing parts of Ripon in particular to be vulnerable to sinkholes. Last November 12 properties in the city had to be evacuated when a hole measuring 66ft x33 ft and a 30ft depth appeared overnight.

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Choosing the right cover is important. Do not feel any compulsion to accept the insurance offered by a mortgage lender even though it is generally a condition of a loan that the building is covered.

“It’s important not to buy purely on price alone but check what cover is included, the limits and excesses,” says Keith Richards of the Chartered Insurance Institute (CII).

Buildings insurance covers the fabric of a property – the walls, roof, foundations and usually outbuildings, as well as fixed fittings like kitchen units and bathroom suites. It also covers gates, pools, drives and paths. In other words, it protects everything that would not be removed if the home was sold.

Such cover is not intended to pay for the routine cost of maintaining a property or wear and tear. This means loose roof tiles or damaged guttering need to be fixed as any damage caused by such neglect would not be covered. Insurers expect boilers to be serviced annually and regular checks to be made to the grouting and sealant around baths and showers to prevent water damage.

Privately owned homes are now worth over £5 trillion for the first time, which is almost three times the size of the UK economy, according to Savills. Halifax say prices have increased 6.5 per cent in a year.

Whilst this is encouraging to home owners, buildings insurance should not be based on the market value, which would include the land. Instead insure for the rebuilding which should include the cost of access and removal of any damage. With a mid-terrace home, this might actually be more than the market value.

The accurate way to establish that price is to instruct a chartered surveyor with experience and local knowledge. For years in between, consult the handy ABI rebuilding calculator.

When comparing policies, a quick, easy guide is to look for the Defaqto rating, which is provided by an independent financial researcher and is unbiased.

There are two formulas for buildings cover: total sum for instatement or bedroom-rated. Many insurers provide blanket cover to a certain level, usually £1m (as with Churchill, Direct Line and Saga), and a few unlimited protection (like Aviva).

Among the key features which distinguish a wide ranging policy from a limited budget one are:

Alternative accommodation if you (including pets) cannot stay in the property for duration of serious repairs

Sourcing a water leak which is causing damage and making up afterwards

No fee for amending a policy.

Many homeowners also like a dedicated UK-based claims line which is available 24 hours a day, every day of the year, and a named claims manager, who has responsibility from start to finish and will aim to keep you informed. Spanish-owned Santander, using Aviva, offers such a policy.

If a break-in occurs, check if the insurer can offer an approved local tradesperson to call quickly and secure the home.

David Rochester, head of underwriting at Lloyds Bank Insurance, has noticed more house fires originating from cheap chargers used for mobile telephones, tablets and other devices including e-cigarettes and left overnight or when homeowners are out. Incorrect fitting of fires and wood-burning stoves also increase fire risk.

One of the misunderstood features is accidental damage cover. Whilst all buildings insurance should provide for such basic aspects as underground pipes, there is usually an extra premium for damage caused by DIY accidents, such as putting a foot through a ceiling.

Some policies really do show a human understanding, such as LV= with cover for damage to home entertainment items and £1,000 towards film or music which has been digitally downloaded.

Insurers are keen to sell combined buildings and contents cover but separate policies are more likely to meet specific needs. Take care with internet comparison websites as the small print is often obscured and may contain key material, such as requiring window locks or an annual maintenance for an alarm.

Remember that some insurers do not appear on comparison sites and so may be worth calling.

However, an independent broker will know the pitfalls and should be able to guide to the most appropriate insurers for your needs. This is vital not only for properties which are listed or have unusual construction, such as thatching, but where they have been built since 2009. From that date, the special flood protection insurance scheme does not accept claims.

An amazingly high 5.2m people in England and Wales are deemed to be at risk of flooding. Yet less than 40 per cent of those at a significant risk are aware. The National Flood Forum is a charity, founded in 2013, that gives independent advice on how to obtain flood risk cover.

Two specialists to consult are Culpeck Insurance Services (01733 208278), a broker who works with AXA, AmTrust and Ergo (part of Munich Reinsurance), and Insurance Choice (01926 454349), the trading arm of FCA authorised Insurance Factory.

Provided a home built since 2009 has not suffered flood damage, LV= will not add a premium.

“Loyalty does not pay,” warn the CII, adding, “each year your insurance will come up for renewal. Do some research to see if you could get a better deal elsewhere.”

There are ways to obtain discounts apart from accepting a higher voluntary excess. Some insurers favour people who are usually at home during the day or if the property lies within a neighbourhood watch scheme.

Post Office Insurance is taking a competitive line. If its quote is above your current renewal and on the same basis, it will match it and pay £50.

Look, too, at the ‘no claims’ discount and how many levels are offered. Churchill, underwritten by UK Insurance, has an unlimited rebuild scheme with up to nine years NCD. Aviva and the Post Office provide up to five years NCD which the former will protect.

Case study:

Emma Ramsden took out Direct Line Home Plus insurance in September 2012. Emma, a self-employed book keeper, discovered a leak under her kitchen floor at her home in Leeds.

The water had caused damage to the tiles which had been fitted to the sub-flooring. They had to be removed along with the kitchen cabinets.

Direct Line paid for her, husband Jamie, their three-year-old son, together with their dog, to go into alternative accommodation. The eventual bill, all paid for directly by the insurer, came to £25,346. The excess was £350. Emma paid just £168.63 premium plus £217.90 for contents cover.