Six insurance blunders to avoid

by Chris Torney on 23 February 2010  |  1 comment
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Make one of these six mistakes with your home insurance and it will cost you hundreds, if not thousands of pounds.

When was the last time you read the small print of your home insurance policy?

If the answer to that is never, you may be one of the many people who are under-insuring their belongings. New research from Sainsbury's Finance has found than more than three-quarters of home insurance policies offer no provision for the music or film downloads that make up an ever larger chunk of consumers' spending on entertainment.

The average web user has a download collection worth £85. In many cases, the value of MP3s and films must be greater than the computer equipment used to store and play them on.

Yet while most policies cover your Mac or PC being stolen, most will offer you nothing to replace any lost content.

And, as Sainsbury's points out, the likes of iTunes and Amazon won't let you re-download a track if you tell them your original has been lost or stolen.

The good news is, many insurers will add on cover for such items for a small extra charge, depending of course on the value of your collection.

This is just one example of how home insurance policies can sell you short, without you realising.

What to do about this

With any type of cover, what you are really paying for is peace of mind. Getting home to find you've been burgled is bad enough: imagine then if your insurance company refused to pay out because you hadn't read the small print, or weren't 100 per cent accurate on your application.

Follow these tips to ensure your possessions are fully protected should the worst happen.

1. Home insurance is two products, not one

The first thing to realise is that there are two, very distinct, types of home insurance: buildings cover, and contents cover.

Buildings insurance pays out if the fabric of your home is damaged: for example, if your roof blows away in a storm, or if subsidence causes structural damage.

Contents cover will replace possessions or furnishings which are damaged in a fire, or stolen, say.

If you have a mortgage on your home, your lender will in most cases stipulate that you have buildings insurance in place. But this doesn't apply to contents insurance, and this is the type of cover that is most often found to be lacking.

If you're renting, your landlord will probably pay for buildings insurance, and may even have contents cover for their own items such as furniture or white goods.

But protecting your possessions will most likely be up to you.

2. Don't be underinsured

When you apply for contents cover, your insurer will ask you how much your possessions are worth.

It is important to get this figure right, even if it means your premiums are slightly higher. If an insurer discovers that you have declared too low a value, it is within its rights to reduce any payouts proportionately.

When you calculate the extent of your cover, think about things like carpets, curtains and clothes as well as the kind of items you'd expect to be stolen, such as TVs or computers.

After all, you could be asking your insurer to replace everything you own in the event of a fire.

Many insurers have online contents calculators to make sure you don't omit any important items.

3. Be honest

The size of the premiums you pay will depend on factors such as previous claims, where you live, and what security measures you have in place.

Insurers share a lot of information now, so you would probably get caught out if you failed to declare a recent claim.

But it's just as important to be accurate about the level of security: if you don't have industry-standard window locks, don't write on your application that you do, just to reduce the cost of your policy.

(Better still, get those locks fitted!)

This is the kind of error that could give your insurer an excuse to turn down your claim altogether.

4. Keep your policy up to date

The more stuff we acquire, the more we need to be insured for. This is especially true of high-value items: if, for example, you were lucky enough to receive an expensive piece of jewellery on Valentine's Day, check that your insurance policy covers it.

Most policies have a value limit above which you need to declare items - and you may be charged extra. But, remember, you are paying for peace of mind.

5. If in doubt, ask

There's no point just assuming that your new bicycle or lawnmower will be insured. Some policies cover items kept in your garage or shed as standard, and others don't. If you're not sure, the simplest solution is to give your insurer a call - most will be able to extend cover if necessary, even if your policy is not up for renewal for a few months.

6. Don't be stupid

Ever tweeted about going on holiday or updated your Facebook status in a way that shows you are away from your home? If so, you are telling someone: please rob me. At least, that's the premise of pleaserobme.com, which lists information about everyone who leaves home and tweets about it.

You may think no burglar would ever join up the dots but Mashable.com  says that video podcaster Israel Hyman was robbed after tweeting that he was away from home, and shows evidence that burglars are turning to social media to find their targets. While the home insurance industry hasn't yet tried to crack down on this, if you are publicising information about your whereabouts using social media sites or apps like Foursquare, then you may be putting your home unnecessarily at risk - and who's to say whether your insurer may define these sort of actions as negligent in the future?

Remember: if you get robbed three times in three years, you are likely to find it extremely difficult and expensive to get insurance in future years. So don't take unnecessary risks, and keep your belongings safe!

Compare home insurance at lovemoney.com