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Home Insurance UK An Englishman's home is his
castle and probably the most expensive item that he or she will ever buy in a
lifetime. It is thus right and proper then, that every effort is made to obtain
good quality home insurance protection to guard against unforeseen
eventualities. Alarmingly, there are still a good deal of people in the
United Kingdom that do not have any home insurance to cover their possessions,
although they may be saving a few hundred pounds a year on insurance premiums,
the consequences of not buying a home insurance policy could be financially
devastating. Until recently, you could be forgiven for believing that there was
not much possibility of a claim occurring at your own home, but even the most
careful homeowner is powerless to stop the spate of wet weather claims that have
happened across the country in the last year. Insurance was invented as a risk
transfer mechanism so those that could afford a small amount of money could
benefit from the pooled funds if a disaster happened. To insure or not can be
dealt with by the simple question,. " Could I afford to reinstate my home in the
event of a serious claim" ? Many flood claims are now costing in excess of
�20,000 to settle, even if you did have that kind of money available, would you
really want to pay it out when there is a simpler alternative method available.
Many homeowners do not realise the consequences of having no insurance and that
in almost all cases having insurance is a condition of your mortgage. If your
property burns down and you still have money outstanding, your lender will still
want to be repaid.
Home insurance has a variety of
sections, three in particular; Buildings, Contents and All Risks. None of these
insurances are compulsory by law although Buildings Insurance is made compulsory
by building societies and lenders as a condition of a mortgage. When applying
for your funds, it is doubtful if the lender will release money for the purchase
until such time as they have seen sight of an insurance policy and had their
interest noted on the schedule of insurance. Noting the lenders interest is
essential, to satisfy the conditions of the contract rights act, the lender
still owns the property ( hence the reason why they keep the deeds) until such
time as the montage loan has been paid off. If there is a serious incident at
the property, they will want to be kept informed of its progress, to make sure
that their financial position is not compromised. Some mortgage lenders, insist
on arranging the building insurance for you, there are two reasons for this;
firstly, they have a degree of control over the cover, they know that if they
have arranged the policy themselves, there is no chance that the policy will
lapse by mistake. Secondly, by selling you a home building insurance policy, the
lender has the opportunity of making some extra money from you by means of a
commission. Many homeowners are unhappy with this situation and unless you have
taken a " special deal" from you lender it is unenforceable. The lender may have
only one insurance company on its panel and the premiums could be more than you
could obtain on the open market. They may not like it, but providing, their
interest is correctly noted, there is no reason why they should stop you taking
your business elsewhere. Some societies , charge a fee to allow you to remove
your policy to another provider. This fee is usually quite small and sometimes ,
your new insurance company , many even offer to pay it for you. If you lender
does insist on arranging your insurance premium, asked them how it is to be paid
for, some lenders simply add the cost of the insurance to your loan and thus ,
you end up paying interest on it. As well as home building insurance, your
lender will also try to provide you with a contents insurance and probably every
other type of insurance, this may be convenient in the short term but then only
real way to obtain cheap home insurance is by shopping around for it.
The Cost of Home Insurance -
alas, all to often people approach the area of how much to actually insure for
in a very unprofessional manner. It is vitally important to give due
consideration to your sums insured to make sure they re adequate. The effect of
over insurance is that you will end up paying too much premium, whilst the
insurance company may appreciate this generosity, they wont reciprocate your
kindness by building you a better quality home in the event that your own burns
down. Whilst overpaying your home insurance may not be too bad an outcome, under
insurance could have fairly bad implications in the event that you have to make
a claim. Insurers reduce claims where there is an element of underinsurance in
direct proportion to the an=mount of under insurance, this is called " Average".
If you submit a �10,000 claim and you have underinsured your home by half, then
your claim will be reduced by 50%, you should receive �5000, less your policy
excess. In effect, because of the underinsurance, you will be deemed to be the
insuring 50% of your home.
There are ways of making sure
your home insurance sums insured are adequate. Firstly, if you have a mortgage
on the property, your lender will usually tell you the sum to insure for. This
figure is usually calculated at the survey stage, There are many disagreements
over this figure as often the lender will want you to insure for the cost of the
loan, which could be considerably more than the rebuilding cost, alas if they
are lending you the money, you must respect their wishes. You can of course
commission your own surveyors report and they will be able to tell you, a
rebuilding cost for insurance purposes. You can attempt to calculate the sum
insured yourself by using the calculator situated on the Association of British
Insurers web site, If you are going to use this tool, please read the
instructions first, it is not suitable for all property types. Once you have
provided the insurance company with a sum insured, each year at renewal , they
will increase it by a process called index linking. This usually adds about 5-6%
to your sum insured each year, depending on the cost of inflation. Whilst this
can help guard against under insurance, it will only be of use if your sum
insured was adequate in the first place. To value Contents in the home, you
literally have to walk around each room with pen and paper and jot down the as
new values for all items. Remember to include everything, including clothing in
your valuation. Contents policies are also index linked but this is no real way
to guard against not having an adequate sum insured. Most people are adding
contents to their homes all the time and if you added up all your home purchases
over a course of 12 months, you may note quite an increase in your
requirements.
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