Home Insurance: How to Avoid Overpaying

Home insurance suffers from the same loyalty problem as car insurance, with an added complication: it is duller, so people pay even less attention. Policies roll over year after year, quietly rising, often covering the wrong amounts.

Know what the two parts are

• Buildings insurance covers the structure — walls, roof, floors, fitted kitchens and bathrooms. If you have a mortgage, your lender will require it. Leaseholders in flats usually have it arranged through the freeholder via the service charge, so check before buying it twice.
• Contents insurance covers your possessions. Optional, but the thing most people would actually claim on. Renters need this and not buildings cover.

Insurers push combined policies as convenient. Sometimes the bundle is cheaper; often buying the two separately from different insurers is cheaper. Price both ways.

Getting the sums insured right

This is where most policies are wrong, in both directions.

Buildings: rebuild cost, not market value

Buildings cover should reflect what it would cost to rebuild the property from scratch, including demolition and professional fees. This is usually considerably less than the market value, because the land is not being rebuilt.

Insuring for market value means paying for cover you cannot use. Use a rebuild cost calculator, or check your mortgage valuation or deeds, which often state a rebuild figure.

Contents: add it up honestly

Most people badly underestimate contents. Walk through each room and total everything: furniture, electronics, clothes, kitchen equipment, tools, bedding, books, garden equipment.

Underinsuring is dangerous. If you insure for half what you own, an insurer may apply “average” and reduce a partial claim proportionately — so a claim for one stolen laptop could be cut in half, not just a total loss claim.

Some policies now offer unlimited or generous fixed contents cover, which removes the guesswork.

The details that catch people out

• Single item limit. Policies cap the amount paid for any one item, often a few thousand pounds. Anything worth more must be specified individually.
• Personal possessions cover is usually a separate add-on and covers items taken out of the home — phones, laptops, bikes, jewellery. Without it, a phone stolen in town is not covered.
• Bicycles often need specifying, especially valuable ones.
• Accidental damage is frequently excluded as standard. It is what covers a foot through the ceiling or paint on the carpet, and it is worth pricing.
• Unoccupancy clauses. Most policies restrict cover if the home is empty beyond a set period, often around thirty to sixty days. Relevant if you travel or have a second property.
• Home working and business equipment may not be covered by a standard policy.
• Escape of water is one of the most common and expensive claims. Check the excess for it specifically — some policies apply a much higher one.
• Subsidence and flood cover, and any specific exclusions for your area.

Cutting the premium legitimately

• Shop around every year and never auto-renew. Start around three to four weeks before renewal.
• Pay annually rather than monthly, which is credit at a typically high rate.
• Raise the voluntary excess only to a level you could genuinely pay.
• Improve security. Approved locks on doors and windows, a recognised alarm, and sometimes a neighbourhood watch scheme reduce premiums.
• Do not claim for small amounts. A claim close to your excess can cost more in lost no-claims discount and higher future premiums than it pays out.
• Use a cashback site for the purchase.
• Check your no-claims discount is being applied — home insurance has one too, and it is often overlooked.

Avoid duplicate cover

Check before adding:

• Home emergency cover may duplicate a boiler service plan.
• Legal expenses cover may already come with your car insurance or a bank account.
• Gadget insurance may duplicate a packaged bank account benefit.
• Boiler cover. Consider whether saving the monthly cost in a repair fund would serve you better, particularly on a newer boiler still under warranty.

Be accurate

Declare previous claims, subsidence history, flat roof percentages, unusual construction, home business use and any unspent convictions if asked. Getting these wrong is the main reason claims fail. The saving from an inaccurate answer is worthless if the policy does not pay.

Keep photographs and receipts for valuable items somewhere outside the house — cloud storage works. Claims are settled far faster with evidence.