Household insurance
Choosing a policy
It may be that the best household insurance policy is the
one offered to you by your mortgage lender. They usually
offer you a policy either separately from your mortgage
or incorporated into the cost of the loan. There are some
genuinely good deals on offer from mortgage providers and
many people may prefer not having to budget for this insurance
separately. However, you should be aware of some of the
potential pitfalls…
Some companies capitalise on the fact that many customers
are too lazy or ill informed to change supplier or hunt
around for a better deal. This can be an expensive decision
on your part - shopping around could save you thousands
of pounds over the life of your mortgage. Some lenders insist
that you have to take their policy with a mortgage.
Some of these even declare a minimum term for which you
must hold the insurance that they offer. During this period
they will charge you for swapping to another insurance provider.
If you shop around, you should be able to find a provider
that will pay this for you. Companies that make this sort
of demand can be trying to offset some of the cost of providing
the competitive mortgage rate that attracted you in the
first place, so beware.
Household insurance offered by specialist providers is
often cheaper than that offered by mortgage lenders. Remember
that every insurer specialises in a certain group of customers
or type of insurance. They will all insure most people for
most things, but the best-priced premiums are to be found
when your needs fit the bill of the insurers preferred customer.
It can be a good idea to ask them what this is in their
case.
Remember that there can be major differences between policies
- you may not be comparing like with like.
Some policies, usually referred to as indemnity policies,
take into account the usage and wear and tear of your things.
This sort of policy will usually require you to know the
approximate date on which an item was purchased so that
the insurers can calculate a rough value on the date it
was stolen or damaged. If you take this type of policy,
be aware that to replace your all your things, you are either
going to need a very successful second-hand shopping trip,
or else stump up quite a considerable amount of cash yourself
in order to buy new.
Many policies offer the more straightforward new-for-old
arrangement, whereby your possessions are replaced with
a brand new, up to date equivalent of the original item.
These are generally more expensive than indemnity policies,
but many people find that the extra benefits are worth it,
especially if they ever come to make a claim.
It's all in the small print, so read it! Many people get
caught out by not reading the details and therefore not
being aware of some of the clauses in the contract that
mean they are not covered for quite what they think they
are.
