Warning: Don’t panic-buy cheap home insurance

Published 13th Aug 2007

Homeowners are being urged not to panic buy their home insurance in the wake of the recent floods which are set to cost insurers over £2.5 billion in claims.

An industry expert warns that while home insurance premiums are expected to rapidly rise in order to cover insurers’ costs, consumers should not automatically choose the cheapest home insurance policy they can find as they could end up hundreds - or even thousands - of pounds’ out of pocket due to having bought inadequate cover.

Andrew Perryman, Sales Director at specialist insurance website www.bestdealinsurance.co.uk, said: “Many people will have a knee jerk reaction to the rising cost of home insurance and will buy the cheapest cover they can find. While shopping around for the cheapest premium does makes sense, unfortunately many consumers are unaware of just what the cover on their cheap policy entails. They see what looks like a good deal and buy it, without taking any advice. This means that when it comes to claiming, in many cases their claim will be rejected as they are simply not covered.”
Those who end up with a policy that they are unable to claim are those individuals who tend to purchase from the internet without first seeking advice.

According to Perryman, a consumer can complete an application for home insurance and be “wowed” by a cheap premium. However, many of the most important additional benefits such as accidental damage and personal possessions cover are not included within this ‘cheap’ premium. But, at this stage many consumers wrongly assume that the quote will provide more than adequate protection and go ahead and buy, enticed by the low cost.

He said: “The largest numbers of issues apply when customers think that they have certain benefits to the policies as standard, but find out later that they have not. Accidental damage on buildings if not selected for example, means that all kitchen units, fixed doors and cupboards would not be covered in the event of a flood, Standard cover on buildings insurance only allows for fixed glass sanitary ware and windows.

“Standard cover for home contents only covers TV, video and audio, not furniture and carpets etc so some people will find themselves grossly out of pocket should they need to claim. As in the case of the Tesco website for example, the accidental damage option can only be selected once an initial premium has been offered. You have to then go onto adding extra benefits, and most people could easily assume that the cover is already included.”

Many of the direct insurance websites where no advice is given offer a ‘one size fits all approach’ which is not often suitable for the average homeowner. For example, some websites quote on an assumptive basis without taking into consideration the proximity of the property to a river or flood plain.

Under these circumstances a claim could well be rejected because of exclusion hidden in the small print somewhere.
Perryman said: “Some companies also attract a customer in with a low premium, without the individual realising that their policy has an unexpectedly high level of excess to pay. An example is that on some websites the customer is asked to volunteer an excess level of say £100 to find out later when they come to claim that this is in addition to a standard excess of £100 - a common tactic to make the initial premium look more attractive!”

So what can consumers do to ensure that they get the right level of cover needed and at the best price?

According to Perryman, individuals should always buy insurance on an advised basis from an independent specialist. “The specialists will be able to fully explain the cover and know which insurers offer good value insurance and which ones are more doubtful.

“Consumers should never just buy a policy because it looks cheap without first looking in to it fully. Advice from a specialist broker will cost you nothing and will ensure that you have the protection you need to cover any eventuality”.
By Jennifer Lowe

Source: ' Personal Finance & Savings '

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