Advice on Cutting the Cost of Home Insurance

Hannah Davidson, Senior Underwriting Manager, Aviva, has the following recommendations regarding cutting the cost of home insurance:

It’s understandable that people are focusing on their finances and potentially cutting back where they can. But when it comes to home insurance, the question shouldn’t be: “can I afford it?” but “can I afford to be without it?”.

We’d encourage people to consider, if the worst was to happen, could they find the money to replace the possessions in their home? Or even more importantly, could they meet the expense of rebuilding their home?

We’d all like to think that events like floods, fires and burglaries won’t happen to us.

But the sad reality is that they can and do happen.

There are ways to help keep the cost of home insurance down, such as buying a combined buildings and contents policy and finding providers which offer multi-product discounts.

Many insurers also offer different levels of cover, so customers should choose the one which best fits their needs.

But they should also be aware of any maximum limits payable on their policy to make sure they are high enough to cover their possessions and crucially home re-build costs.

To help with this tricky calculation, the Association of British Insurers provides a calculator for home rebuild costs on its website that you can use as a guide.

Aviva has put together the following tips which could help to keep down costs when taking out home insurance:

• Consider a combined policy. If you own your home, outright or with a mortgage, you may save if you buy combined contents and buildings cover, rather than two separate policies. However, if you rent, you’re likely to need just contents insurance to protect your possessions inside the property.
• Look into multi-product discounts. Some insurers offer discounts if you have more than one product, such as home, motor, travel and even health insurance.
• Check if your home is in a flood risk area. If it is and it was built before 2009, ask if your insurer is part of the Flood Re scheme*, which helps to improve the affordability of flood insurance for those living in high-risk areas. Some insurers are not part of the scheme and premiums may be higher for people living in high-risk areas, or they may exclude flood cover, so it’s important to check.
• Choose a higher excess level. Most home insurance policies have a standard excess if you make a claim, but you can choose a higher excess amount that can often lower your premium. But do check you could afford to pay it if you needed to make a claim and consider how you would pay it. Avoid incurring credit card debt if possible.
• Don’t double up. You may be asked if you want to take out additional insurance when buying new items such as a sofa, carpet or phone for example. Before you say “yes”, make sure you’re not already covered under home insurance, particularly if you have accidental damage cover. If you don’t have accidental damage cover, you may find it’s cheaper to add it to your home policy than pay for separate policies, but always check the terms.
• Think about add-ons. Your home insurance premiums will usually increase if you add on optional covers such as ‘accidental damage’ and ‘personal belongings’ which can cover items away from the home. But make sure you could afford to pay for a new item if you did lose or damage something or you may find that removing an add-on could be a false economy if you need to claim.

There are also a few areas where it pays to do your homework up-front.

Here are a few additional tips to avoid any shocks or disappointments in the event of a claim:

• Know your “single item limit”. Home contents policies will generally have a “single item limit” for valuable items and personal belongings, the maximum payable for any one item in the event of a claim. Anything above this limit – usually around £1,000 – £2,000 – should be listed separately on your policy, to ensure you’re adequately covered.
• Check the value of your valuables. The price of precious metals has soared in recent years, so it may be worthwhile getting an independent valuation for jewellery items if you’ve had them for a while, in case they are now worth more than your single item limit. The same is true of some high-end watches and it’s worth checking the current value of items you may already have specified to make sure they’re insured for the full replacement value.
• Avoid underinsurance. Underinsurance occurs if the total sum insured – the total amount an insurer would pay out – is less than the value of your possessions (in the case of home contents cover) or the cost of rebuilding your home (for buildings insurance). Some insurers offer ‘blanket or unlimited cover’ so you don’t need to estimate values, but if you do, make sure you don’t sell yourself short. Remember to include items such as carpets and curtains when considering your contents.

When it comes to buildings, be aware that the sum insured needs to be enough to totally rebuild your property, including outbuildings and things like boundary walls, fences, driveway and patio.

It’s important to understand that the rebuild cost is not the same as the resale value, which could be more or less depending on your property.

• Be mindful of different limits for sheds, garages and outbuildings: Most insurers have an upper contents limit for items stored in outbuildings, often around £2,500, although this will vary from one policy to another. Insurance providers may also ask that any individual items stored in outbuildings worth more than a certain limit – for example around £1,000 – are listed separately on the policy, so consider carefully what you keep away from the main home and ensure you have good security in place on your sheds and garages to deter opportunist thieves.