How to get the right buildings insurance

Friday, 3 April 2009

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By Seamour Rathore
seamour.rathore@consumerchoices.co.uk

Don’t run the risk of cutting corners on your buildings insurance. You need to be insured for the full reinstatement value of your property if things go wrong.

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Although house prices have been falling for 18 months, the cost of re-building your home, if it were destoyed by fire or freak weather, has not fallen. So although Brits are doing their best to economise on household outgoings, think twice before cutting corners on buildings insurance.

An recent investigation by Norwich Union found that of 128 property valuations, 86% of the properties were underinsured – representing a £314million shortfall in cover.

If the worst should happen and you are underinsured on your buildings, you will have to pay the shortfall. In the past, property owners would have had the option of borrowing money to cover the problem but as access to credit has become harder, that may be more difficult now.

In this guide we will look at what buildings insurance includes and how to ensure you get the right cover for your home.

• What is buildings insurance?
• What else should buildings insurance cover?
• Do I need additional home cover?
• Cutting the cost of buildings insurance

What is buildings insurance?

Buildings insurance generally covers damage to your home and its permanent fixtures in the following cases:

• Fire
• Storms, floods and earthquakes
• Subsidence (movement in the ground supporting your property)
• Theft and vandalism
• Falling trees and branches – includes cover for damage to items like TV aerials
• Burst pipes, or leaks from tanks or heating apparatus

Cover is extended to other fixed buildings such as garages and sheds. It also usually includes permanent fixtures, for example fitted kitchens and bathroom suites.

Buildings insurance is compulsory for a mortgaged property, but that doesn’t mean you have to take out a policy from your mortgage lender. It’s important that you compare the market to ensure you have just the right cover for your needs.

If you live in a flat, it is recommended that all the properties in the premises share a buildings insurance policy as that will ensure areas including the common parts are covered. In many cases, the buildings insurance will be the responsibility of the freeholder and they will ask for an appropriate share of the premium from each flat owner in a block, either separately or as part of the ground rent.

The Association of British Insurers and the Building Cost Information Service has an online buildings insurance calculator which you can use to establish what your sum insured should be. The sum insured should be at a value which is enough to reinstate the property. The sum insured is not the same as the market value of a property or the council tax band it falls within.

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What else should buildings insurance cover?

There are several important things to consider when choosing an insurance policy:

• Sum insured - If you get the reinstatement value of your home correct from the offset, you will find that the insurer index-links it – the sum insured will go up according to the rising cost of prices generally. However, if you extend it or make significant improvements such as a high-end fitted kitchen, be sure to tell your insurer so that you are not left underinsured.
• Get your whole property covered – Your buildings insurance should take into account things such as sheds and garages. You should also check carefully to ensure that things like paths, fences and boundary walls are covered too.
• Exclusions – You may find that damage caused by some events is not covered. These include things like war and contamination by nuclear explosions. Vandalism and damage caused by theft are normally covered for homes, though. It is also important to keep your property in a good state of repair and well secured as normal wear and tear is not covered by buildings insurance policies.
• Unoccupied houses – Most policies ask you to tell your insurer if you aren’t going to be living at your property for more than 30 days. You must also tell your insurer if you have been repossessed by your mortgage lender – you will need to keep paying the buildings insurance until the lender sells the house, even if you aren’t living there.
• Flooding – The Association of British insurers has struck a deal with the government to ensure that people living in houses with a risk of flooding can still get buildings insurance, as long as the Department of Environment maintains flood defences. However, if your house is at risk of flood or subsidence it is likely that you will be facing a much higher premium and excess.

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Do I need additional cover?

There are various add-ons to standard buildings insurance, some of which may come as part of your policy, others which you may want to add.

These include:

• Alternative accommodation – If the damage to your property is so severe (ie in the case of flood or fire) that you have to move out, this will cover the cost of hotels or renting a property while the damage is repaired.
• Emergency repairs – Some insurers offer emergency hotlines so you can get immediate help in the case of problems like burst pipes and broken boilers. The cover provides financial help up to a stated amount to pay professional workmen to fix the immediate problem.
• Liability – If someone is hurt or their property damaged while they are in your house you may be legally liable. With liability cover you will have help to defend yourself and pay the damages.

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Cutting the cost of buildings insurance

Unlike many other types if insurance, the cost of buildings insurance has not rocketed in recent years. Nevertheless there are still tips you can use to get the best deal:

• Buy your buildings and contents insurance from the same company – you’ll often get a sizeable - as much as 30% - discount
• Build up your no-claims bonus to keep a lid on rising premiums
• Buy online – you can get discounts which won't be available if you buy over the phone or through a local broker
• Consider paying your premium as an annual lump sum rather than by monthly direct debit
• Do your research and examine several insurers’ policies so you get the deal that’s right for you.

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