I bought a new house quite recently which prompted me to update my home insurance provisions. The process of finding an appropriate policy was really quite straightforward and I’ve listed the key elements below:
1. Create a shortlist of companies whose policies you’re going to compare:
No matter what financial product you’re thinking of buying, this step is vital. If you just plump for your local insurance company, then you have no way of knowing whether you’re getting a good deal. On the other hand, it would be too time consuming to check out every policy that’s available on the market, so the sensible way to go about things is to compare a selection of companies.
The great thing about the Internet is that you can also use money comparison sites that automatically do this shortlist comparison for you. This was an approach that I used when taking out my new home insurance policy. (Note: My previous supplier of home insurance wasn’t featured on the money comparison site and turned out to be uncompetitive.)
2. Decide what type of cover you require:
When people speak about home insurance, you will quite often hear them talking about having purchased buildings and contents insurance’. However, the buildings’ and the contents’ parts are actually distinct types of insurance and, whilst you can purchase them together, you also have the options of purchasing them separately.
Buildings insurance is typically what your mortgage provider will insist that you have and covers the cost of rebuilding your home (i.e. the bricks and mortar) in the event that it gets damaged by a fire or flood, etc.
Contents insurance, as the name suggest, covers the internal contents of the house, such as your furniture, CD collection, computer, etc.
It can be convenient to purchase a combined buildings and contents insurance policy but it’s worth bearing in mind that the cheapest option might be to shop around and buy them separately from different providers.
3. Decide what level of cover you require:
A common mistake that homebuyers make is to insure their house for the amount that they purchased it for. It’s a mistake because the insurance company will only pay out for the rebuild value of the house. So, in other words, if your house was destroyed by a fire, what would it cost to physically rebuild it? Often, this may be considerably less than what you paid for the property.
With contents insurance, you need to decide what value of items you need to protect. And, again, it won’t be the price you paid for your computer but, rather, its current estimated value.
4. Get some quotes:
Now that you know what types of home insurance you need and what value you need to cover, it’s time to get some quotes. You could do this by phoning up various insurance companies but it’s generally easiest to get the quotes online. If you have any queries, or need assistance in choosing a policy, then most companies will have a help number that you can phone.
Having got your quotes, you should be in a position to choose the best one. Price will be an important factor in this choice but may not be the only consideration.
5. Purchase the home insurance:
To purchase home insurance, you will need to complete an application form. It will ask for lots of information about you (the usual stuff) and about your house.
Having submitted your application, the insurance company will assess the information that you’ve provided and then come back to confirm if they can offer you the insurance. They may then send you a copy of the submitted details for you to sign and return but, typically, there isn’t the same level of documentation required to be sent off as if you were applying for a loan or bank account.
6. Receipt of documentation and yearly renewal:
You should receive a copy of the insurance schedule. Check the details and make sure they’re correct. An inaccuracy could potentially invalidate a future claim so it’s important that everything is correct.
After a year, the policy will come up for renewal. Usually, the insurance company will contact you to let you know that the renewal is approaching. Rather than just automatically sticking with the same company, you should use this as an opportunity to do a quick check to make sure that the policy is still competitive.
If you’re unhappy with the policy, the renewal period offers the opportunity to switch to another company with no penalties. However, once you’ve renewed the policy, then you’re bound to stick with the policy for another year or pay an early closure fee.
Nobody likes paying insurance. We feel that we’re paying for something that we may never need. However, look at it as buying peace of mind. By paying out those few dollars or pounds per month, you can sleep safe knowing that you’d be covered if anything did happen to your house or contents.