Your home is probably your greatest asset and should be fully insured. Whilst those with mortgages are required by their loan provider to have such cover in place, the massive costs that can arise in the event of a claim should encourage everyone to protect their bricks and mortar.
Whilst many would subscribe to John Howard Payne’s view in Clari, the Maid of Milan that “there’s no place like home”, it is surprising that properties are either not insured or substantially under-insured.
Clearly the risks that can arise and expenses involved in restoring a property has eluded some.
The Association of British Insurers says that 2.295m policies cover domestic buildings alone with 11.85m insured on a combined buildings and contents basis.
Despite the rise in Insurance Premium Tax from six to 12 per cent in June last year, the average annual premium is just £275. This is a bargain for the substantial risks that can arise.
The average cost of domestic claims for ‘fire and explosion’ and ‘escape of water’ has been steadily rising. The former increased to £15,275 in the first nine months last year, up from £13,134 in 2015 and £14,074 in 2016.
Last year fire damage to one house and its contents resulted in a £700,000 claim to Aviva. Few realise the impact that lightning strikes can have to aerials and telephone lines, taking out junction boxes, PCs, routers and televisions. The reasons for claiming have changed with subsidence in third place a decade ago, followed by fire, and today Aviva says the position is reversed.
Insurers pay out over £7.5m in home claims every day. Bad weather is a major and unpredictable factor. The storms in the 2015/16 winter caused widespread flooding, damaging thousands of properties, but insurers paid out £1.3bn to support the recovery of victims’ homes which included the provision of alternative accommodation in many cases.
With independent research warning that the UK is likely to experience windier weather in the future, there has never been a more important time to protect your home.
Start by establishing the true cost of rebuilding if any major accidents or damage should occur. This is not the value for sale as that includes the land. Ideally, this calculation should be made by an experienced chartered surveyor. A rough indication of the rebuilding costs but which does not take into account regional price differences is the calculator provided online by the Royal Institution of Chartered Surveyors, abi.bcis.co.uk
Ross Garner, Home Insurance specialist at NFU Mutual, says that if your property is listed, “restoration could involve listed building consent, specific materials that are in limited supply or the application of building techniques that are no longer widely practised”.
The reconstruction of contemporary homes, such as eco builds, may involve state-of-the-art construction processes which will need to be carried out by specialist contractors. Even a well-finished, modern fitted kitchen can easily cost more than £25,000 to replace.
Fire continues to be one of the largest reasons for claiming. With the increased popularity of wood burners, there has been a spate of chimney fires. If an open fire, multi fuel or wood-burning stove is used, ensure the chimney is swept regularly. Use recommended hard woods that have been seasoned for two years and place bird guards to deter nest building in a chimney.
With new methods of heating homes using renewable energy – notably biomass boilers, solar panels and air and ground source heating – insurers expect equipment to be installed and regularly serviced by professionals.
Do not buy cover just on price as often policies are available with much wider cover for not much more money. Ask what arrangements are made in the event of a claim. Some insurers maintain local branches to respond with specialist assessors quickly and have emergency trade personnel on call. Sadly, fire and flood can leave people temporarily homeless.
When reinstatement occurs, check if there is the choice of using your own supplier, such as carpet company, or if you are obliged to accept an insurer’s contractor.
With over 440 building policies available from 176 insurers, it can be difficult to check on your own. If the property is old or has any unusual features, consult a broker with a regional list available from the British Insurance Brokers’ Association (online at biba.org.uk). Look at the ratings given by independent analysis, like Defaqto (defaqto.com/homeinsurance), on the breadth and quality of cover.
Comparison sites, several of which contain policy ratings, make a good starting point but use several as they often have access to exclusive products and prices. Then check those key insurers, like Direct Line, which do not appear on such sites.
One trend noticed by Brian Brown, head of insight for general insurance at Defaqto, is for newer and larger excess amounts, which is the first part of any claim that the insured has to fund. Traditionally, there was one standard excess apart from subsidence, which was usually £1,000. Now there may be separate excesses for water and also for accidental damage.
This reflects the number of bathrooms with more frequent claims for bath and shower leakage. In 78 per cent of policies, the escape of water excess is £250 or higher and in 28 per cent at £350 or more. Saga, which uses 11 underwriters including the Co-operative, Legal & General and RSA, says more water claims may arise as pipe work comes to the end of its life. Copper tends to break down after 50 years.
“As a result, detached houses built between 1955-1979 have the highest number of claims,” says a spokesman. Burst pipes can cause claims “easily exceeding £10,000”, says Aviva.
Accidental damage to underground services, along with glass breakage or sanitary ware, used to be part of standard cover but is now likely to form part of an additional premium. Most insurers require notice of any building or renovation work.
Hiscox provides a building and renovation product which ensures protection is in place whilst works are carried out.
Saga gives four tips to avoid winter water claims:
Keep heating on constant which can be at a lower than normal temperature
Check insulation of pipes, loft and water storage, like a tank
Repair dripping taps and replace washers where needed
Keep loft hatch lightly open to let warmer air circulate which prevents pipes in the loft freezing.
Paul Stokes at M&S Bank, whose buildings policy is underwritten by AXA, says to check your roof for loose tiles, clear debris from gutters and prune overgrown trees close to your home.
Insurers often set security conditions, notably approved locks and alarms fitted. If required, such arrangements must be put in place as otherwise a claim may be rejected.
Look for policies which give extra add-ons, such as home emergency cover at no extra cost. They can be useful if problems arise on plumbing, heating failure or storm damage.
Finally, look for special deals. Both the Post Office and Rias guarantee to beat your renewal quote by at least £50.