If you are trying to cut down on your monthly outgoings, and many of us are under pressure to do so, you might be tempted to risk discontinuing your home insurance. Perhaps you have already done so and you don’t have home insurance. Unless your home is mortgaged then you are under no obligation to insure, so why not take the risk?
While many home insurance claims are for small amounts you could probably afford to cover, have you considered what you would be if your home was destroyed by fire or was damaged by a flood? It is unlikely that you could recoup the cost.
According to Property Wire, around 3.5 million UK homeowners don’t have adequate home insurance. In the rented sector, a third of households have no home insurance at all. 1.5 million home owners don’t have buildings cover and 1.3 million have buildings cover but are missing out on contents cover. Two percent of home owners have no home insurance at all.
To judge the risk you would be taking, consider that according to the Association of British Insurers, insurance companies paid out on average £9.1 million a day on domestic home insurance claims during 2013.
If you rent your homes then you won’t need buildings insurance as this is the landlord’s responsibility, but without contents insurance you are risking the loss of all your possessions should they be stolen, damaged, or destroyed.
It is important to make sure that you have adequate home insurance. Your buildings insurance should cover you for the cost of rebuilding the property rather than its market value. Normally this isn’t a problem, for instance, home insurance from More Than will cover your buildings for £500,000 plus £30,000 for emergency accommodation to cover you should your home become uninhabitable.
You should make sure that your contents insurance covers the loss of all your contents. Under-insuring your contents to save money will leave you at risk. Should you need to make a claim, then the amount paid out could be reduced. It is always advisable to make an inventory of your contents and list their replacement value. This advice from the ABI should help. Many people are surprised by how much the replacement value of their contents is. If you have any high value items such as jewellery of works of art, these should be documented and you should inform your insurers. You might need special cover for them.
It is also important to consider the things that are not covered by home insurance. Ordinary wear and tear isn’t covered and you might not be covered for damage caused by leaking gutters if you didn’t maintain them. Damage caused by insects and birds might not be covered and unlikely that storm damage to fences and sheds would be covered by you policy. If you want cover for items such as burst water mains, you should be able to take out an additional policy, perhaps with your water company. It is always advisable to find out what your home insurance policy covers and what is excluded.