When it comes to annual bills, passivity is a cunning enemy. Home insurance renewal is a perfect example of how we can blithely waste money at best, and weaken our position at worst, if there is a life-altering happening endangering or even routinely damaging our home or property.
The paperwork bleats weakly in the inbox and drifts to the front doormat. Bounced on to a drawer we decide that it’s handled, done, dusted. I had a very nasty wake-up call last year when I finally bothered to take enough time to read over our recently refreshed policy of several years vintage.
We recognised some troubling issues in the finer detail, and were completely responsible for the oversights. Hair crispy, an hour of phone calls finessed the policy back to sanity. I’m thankful that I had had no reason to repair or, God forbid, rebuild my home following, for instance, a fire.
If you do one thing this weekend please go over your paperwork and relate it to not only your own situation but the current, highly volatile property and construction market.
Cathie Shannon, BCL LLM Solicitor (non-practising) and CIP QFA of Brokers Ireland, explains what we need to think about when starting out applying for our policy or reviewing an existing policy. “The rebuild cost of the home is important, Cathie says, “rather than the market value of the house. If you are not sure what this is, log on to the Society of Chartered Surveyors (SCSI) website for a handy rebuilding calculator.
“Also, keep in mind that the typical home insurance policy covers buildings and contents, each of which is insured separately for a separate sum. If you have valuables, these will need to be insured separately otherwise you might not recover the full replacement value if they are damaged or destroyed.”
According to most insurers, contents are anything you bring with you when you move house.
Building costs should be re-assessed annually. “This is a key part of the service your broker will undertake,” explains Jim Power of Power Insurances. “The tool on the website of the SCSI should work for this. Do bear in mind though that the SCSI calculator just gives general rebuilding costs so you will need to talk to an insurance broker if your house is bespoke or has higher than usual value building or contents.”
What are common and unexpected mistakes policyholders make when choosing a policy?
“Either being over or underinsured,” Cathie affirms. “There is no point in being over-insured as this will not result in larger pay-outs in the event of your making a claim.
“If your home and its contents were to be completely destroyed by an insured peril, your recovery will be limited to the rebuild costs plus the value of the contents, regardless of how much you had the home and contents insured for.
“On the other hand, if you insured your home for an amount less than the rebuild cost, you may find that the insurer is only bound to pay you a percentage of your loss and that you will be deemed to be self-insured in respect of a percentage of your loss. Insurance companies will only pay the maximum amount for which you were insured.”
Jim Power adds, “Consumers need to be very careful about the conditions and exclusions attached to different policies and the level of cover offered.
“A broker will always explain this to their customers and offer the best policy to meet the consumer’s needs. If you contact an insurer directly, they will offer you a price for home insurance from within their own range of products. If you contact an insurance broker, they will search the market.”
What about working from home or running an Airbnb? How might these lifestyles affect a policy? Transparency seems to be key. “There are specialist broker-offered policies that will cover this,” Jim says. “Home insurance policies generally cover risks such as fire, theft, loss and damage. They tend to cover a small home office but not if you are running any type of business from home.
“For example, if you are operating a business and a visitor to your home slips or trips on the way out you could be liable for any personal injuries suffered, unless you have a public liability policy in place. The very fact you have a business at home and haven’t told your insurer could invalidate your policy.”
Flat roofs and timber exteriors come up a lot in discussion with our readers, and I wondered what improvements would be expected in an up-to-date house whatever its age. Cathie emphasises that in the case of unusual and off-standard situations (not just the construction type) an insurance broker will have access to specialist insurers and policies not available to the general market.
It is worth considering the year of construction of your home and whether this has been disclosed to your insurer.
Jim Power explains, “If an older property has been rewired and/or re-plumbed it is more likely to be considered as a standard risk or at least accepted. Thatched roofs, particularly in holiday homes, are generally considered non-standard and may be more difficult to insure. Flat roofs are generally considered to be more prone to leakage.
An insurer might agree to insure a home that had a roof that was 25% flat-roofed, but no more, he adds. “Be alert to this kind of requirement,” he says.
“Unoccupied properties are viewed as non-standard. For example, if an elderly parent has to go into a nursing home, leaving their home unoccupied then this should be advised to your insurance broker or insurer.”
Theft is always a concern for anyone whether renting or occupying their own home.
Do all alarms have to be fitted by an NSAI professional to be accepted? Insurance broker Jim cautions that homeowners need to be careful about selecting a discount for the alarm. “There may be a discount available for a bell alarm, or a larger discount for an NSAI-installed alarm, or for a monitored alarm. However, homeowners should be careful with the wording of such discounts, which sometimes require that the homeowner actually set the alarm when the home is unoccupied.”
Do alarms have to be monitored? “This may vary from insurer to insurer,” Jim explains, “The policy will say what the conditions are for an acceptable alarm system.”
Again, the message is clear — read the policy edge to edge, front to back, and if you don’t understand something, contact your insurer or insurance broker to ensure you don’t invalidate any future claim. Exterior locks are generally expected to be five-lever mortise deadlocks.
Excess is one way to save money on smaller claims. Allowing us (the client) to cover or contribute to a repair for example.
How much excess should someone include, and what’s a good way to come to that figure? “Consider if you needed to make a claim now or in the near future how much money could you comfortably afford to pay,” says Cathie. “Then balance this against the increased cost of a lower excess. Often taking a large excess does not save a lot of money.”
Should we always claim on our insurance policy?
“Generally, claims made tend to lead to increased premiums therefore policyholders should carefully assess whether the potential recovery on the claim will make it worthwhile,” Jim says.
“The excess payable by the policyholder may make the potential recovery quite small. A small increase in premium as a result of a claim having been made may add up over a number of years. Do a cost/benefit analysis.
“Again an insurance broker will be in a position to provide advice on this. Some areas of cover, such as flood, may not be offered again if claimed for as the insurers may view it as a certainty to happen again.”
Shop around for a quote, and consider an independent, local insurance broker, who will do the legwork for you to find the best policy to meet your demands. “The broker will always tell you why s/he is recommending a particular policy too,” adds Jim.
“Often the cheapest policy will not be the best policy to meet the consumer’s needs. Consumers often find making a home insurance claim stressful, particularly if the issue is serious or has caused significant damage to their home or its contents. An insurance broker will be there for you, dealing with the insurer on the consumer’s behalf.”