Saving on your property insurance

Property insurance provides essential protection for your home (or investment property) and, if required, its contents. Not only does it safeguard your home, but also those of your neighbours – if a fire in your house spreads to your neighbours’, for example, you may be held liable for the damage caused.

Property insurance typically indemnifies you against such losses (up to insured limits).

It is surprising, therefore, that a survey conducted by the housing charity Shelter found that as many as one in five homes in the UK do not have the protection of home insurance to safeguard either or both the building and its contents.

The findings echo revelations published by the Express newspaper in March of 2017, that one in ten householders have never attempted to value their possessions and that even amongst those who have, many are likely to get the valuation completely wrong.

The results of Shelter’s research – published on the 26^th of October 2017 – showed that the overwhelming reason (given by 68% of those interviewed) for failing to insure a home was the expense.

So how might you make savings on that cost?

Building and contents insurance

• if you are a homeowner, you have a clear interest in insuring both the building and the contents of your home;
• although you may arrange separate policies for each, it is often cheaper to combine both building and contents insurance in a single policy with the same insurer;

Over/underinsurance

• Martin Lewis, the Money Saving Expert, argues that many homeowners make the mistake of over-insuring the building (i.e. arranging insurance for a value that far exceeds your property’s true value) – and so pay more expensive premiums than may be necessary as a result;
• an accurate valuation of the property and its regular updating may avoid the problem – and the Association of British Insurers (ABI) and the Royal Institute of Chartered Surveyors (RICS) publish a reconstruction costs index to help you do so;
• with respect to contents insurance, on the other hand, there may be a tendency to commit the opposite mistake of underinsurance – which risks insufficient cover for your belongings, so that any insurance settlement fails to provide the money to replace or repair lost or damaged items;

Security

• the more you do to make your home and its contents secure – to protect against theft and break-ins – the better your chances of obtaining a discount on your insurance premiums;
• insurers are entitled to expect that you take all normal commonsense precautions against such incidents, but upgrading locks or installing burglar alarms may earn a discount on the premiums you pay;
• if you are a tenant, it may be worth persuading your landlord to upgrade security in this way, since it may not only reduce the cost of your own contents insurance but also that of your landlord’s buy to let insurance too;

Excess

• just as with many other types of general insurance, home insurance invariably incorporates excesses (the first part of any claim, which remains your financial responsibility);
• you might agree to accept a higher rate of excess in return for a reduction in the cost of the premiums you pay;

Paying for your property insurance

• if paying for your building or contents insurance is an issue, you might be tempted to spread the cost over monthly instalments throughout the year;
• since in some cases this involves a credit arrangement with your insurance provider (meaning you pay interest on the amount), it may be more cost-effective to pay the annual insurance premium in one single payment at the beginning of the cover.

Failing to arrange the property insurance you need may prove a false economy – especially since there are ways in which you might reduce the cost of such valuable protection.

You should also note that if you have a mortgage on your property, typically it may be a condition of your mortgage agreements that you have, at the very least, basic buildings insurance. This protects both your and your mortgage lender’s financial interest in the property.

Further reading: 16m Brits without home contents insurance