Chances are you have some form of home insurance, whether it’s a comprehensive buildings and contents policy or just contents cover if you’re a tenant. But despite being one of the most important financial products around, it is surrounded by many myths and misconceptions.
Here are seven of the most common:
1. Accidents will be covered
Accidents do happen, whether it’s the TV falling off the wall or that pot of paint spilling and ruining the carpets. Not to worry, the home insurance will cover it, right?
Well, not necessarily. While some home insurance policies offer cover against accidental damage, it’s certainly not a given. Indeed, policies will generally cost more if you want to cover yourself in case misfortune strikes and you damage something in the home accidentally.
2. I should insure the property for its market value
If you are the freeholder, then you will need to arrange buildings insurance. This is a form of insurance that protects the actual building itself, from the walls and floor to the roof.
You will need to set out exactly how much cover you need, and an easy mistake to make is to go for the market value of the property. However, what you actually need is the rebuild cost of the property, which may be rather different.
The Association of British Insurers suggests using the Royal Institution of Chartered Surveyors’ (RICS) building cost information service to establish what the rebuild cost of your property is likely to be.
3. Homes with a history of flooding won’t be able to get insurance
It’s true that after the dramatic floods in 2007, homes that were affected had a difficult time arranging affordable home insurance that included flood cover.
However, the launch of Flood Re - a new scheme helping insurers offer more affordable flood insurance to people living in areas at risk of flooding - has made a huge difference.
Even homes with a history of flooding should be able to arrange cover now. According to figures from Flood Re, around four out of five householders who have previously made a claim on their insurance due to a flood have seen a 50% drop in the cost of their current cover.
4. I have contents cover, therefore my belongings are completely covered
If you have contents cover worth £50,000 and belongings worth the same, then you may assume that in the event of a claim everything will be entirely covered. That’s not necessarily the case though.
All contents policies will have single item limits, which as the name suggests is the most that the insurer will pay out to replace one single belonging. These limits tend to be around £1,000-£1,500, so if you have some high end jewellery or electronics you may face a shortfall in the event of a claim.
If you have items worth more than this limit, then you need to have those items named on the policy so that the single item limit does not apply.
5. You should bump up the size of your claim
There is a misconception that an insurer will look to knock down the size of your claim, and so the way to combat this is to bump up the size of your claim.
However, knowingly overstating the size of your claim is a form of fraud and could have very serious consequences.
Fraudulent claims also make insurance more expensive for everyone. According to the Association of British Insurers, fraud can add up to £50 to the annual insurance bill for every UK customer.
6. I have to get my buildings and contents insurance from the same company
Buildings insurance and contents insurance are two distinct forms of cover, and while you can get a combined policy covering you for both, you don’t have to.
If you want to, you can opt to take out separate buildings insurance and contents insurance policies with two different insurers. Bear in mind this will mean more admin though, with two different applications and renewal dates to keep on top of.
7. My belongings are covered outside of the property as well
Some home insurance policies will offer protection when items are taken out of the home, for example if you take your laptop out with you to work.
This certainly isn’t a given though; you may need to pay extra for this feature on your policy.