Home insurance is one of those areas which seems to slip through the net when people are looking over their obligations to ensure they are both adequately covered and not paying too much for it.
Too many people are content to continue paying the cost of insurance policies which may initially have been chosen for them by mortgage providers. It is always possible that such policies represent the best value on offer, given that insurance companies regularly do deals directly with mortgage providers which are not always accessible to brokers. However, there is no harm in looking around.
What insurance?
The first thing to examine is precisely the level of cover required. This, broadly, breaks down into four areas of risk:
damage to the building itself;
damage or loss of home contents;
loss of personal items, possibly outside the home;
liability for injury to others on your property.
The first thing to note is the current boom in house prices is not a reliable reckoner when gauging the amount of cover required to insure against damage to the building. What is needed is cover up to the cost of rebuilding the property if needs be in the case of catastrophic damage.
Building costs have not risen by nearly as much as house price inflation in recent years, but it is still worth checking whether there is adequate money in the current policy to offset the risk.
The Society of Chartered Surveyors annually issues guidelines on valuing houses for the purposes of in surers. But if it is a long time since the property was last valued, it might be worth getting a proper survey done. This cost is low due to the relatively low risk involved.
More costly is insuring the contents of your home. Many people now have index-linked insurance cover. However, that will only inflation-proof those contents which were initially insured. If, like many homeowners, the initial element of contents cover was low to reflect the fact new homeowners had little money to spend on expensive furniture, the need to address changing circumstances is vital.
If the contents element is only, say, £20,000, the insurance company is only liable for that amount and then only if all the contents are destroyed or damaged. Damage to a portion of the contents will generally be paid on a proportional basis.
The best way to check the current value of contents is to make a room-by-room list and put a value against each item, not forgetting the basics such as clothes and freezer foods which can be more costly than one might think to replace. The same goes for collections of glass, china or music and electronic gadgetry.
Covering against the risk of losing items such as jewellery outside the home needs to be covered separately. There will be a specific premium or element of the premium to cover such risk; check that the cover is sufficiently high to protect valuable items you may take outside the home such as camcorders and cameras.
Lastly, public liability insurance can save you costly bills in the event of people being injured on your property. In its absence, you would need to ensure that people working on the property carry their own insurance, including cleaners, gardeners, etc. Many home policies include an element of public liability but it is worth checking.
Counting the cost
It is quite common to protect against all the four areas outlined above in the one policy, but this is not always the case. There are a lot of insurers in the market these days and with premiums rising, especially in the area of contents and all-risks cover, it is worth shopping around. Don't assume the deal you made when you first bought your home 10 years ago is still the best on offer. The market has changed considerably in the interim and, especially in certain parts of the country, the risks against which you should prudently be covered have altered.
Send your queries to Q&A, Business This Week, 10-15 D'Olier St, Dublin 2 or email to dcoyle@irish-times.ie
