Average Building And Contents Insurance Costs
average building and contents insurance costs
UK Home Building Insurance – the Problems With âunderinsuranceâ
Everyone wants cheap insurance, but there are certain ways to go about lowering your premium and certain ways you must not. A definite no no is to underestimate your sums insured for either your buildings or contents insurance to secure a lower premium (Most premiums for buildings and contents insurance are calculated on the sums insured, the higher the sums insured, the higher the premium).
This is a common mistake as many believe they do not need to insure for the full amount as they are never likely to experience a total loss incident. However, even if you end up only ever having a small claim; if you have selected an incorrect sum insured you could face having the amount of your claim reduced or worse, not paid at all.
Almost all insurance policies contain something known as an average clause. This has the effect of reducing claims for partial losses in direct proportion to the under insurance.
To keep the maths simple, let’s just say that you decide to insure your building for £200,000 but in reality it should be insured for £400,000. You then have a fire at the property which although is not that serious, the insurance company decide to appoint a loss adjuster to visit your premises to check on the claim details. After viewing your premises, he calculates that your correct sum insured is the higher amount £400,000. If the cost of your claim comes to £20,000, you are likely to see a reduction in the amount you will be paid to £10,000. Thus your claim is reduced in direct proportion to the amount of under insurance. In practice average clauses are not applied to claims where the amount of under insurance is small, however if the amount is large or look deliberate, you could have problems.
The same technique will be applied to Contents Insurance claims.
To stop this happening you must select the correct sum insured for both your buildings and contents. For buildings it is fairly easy as most people will have a mortgage and the lender will simply tell you the amount to insure for. To guard against under insurance, an index linked policy must be obtained.
Contents insurance polices are usually written on a new for old basis, this basically means that if you have a claim, your old goods will be replaced with new ones, this is a great idea as it removes the worry of how much items have degraded via wear and tear. It is usual to have new for old cover on all items except clothing. To obtain new for old cover you simply have to insure all of your items in your home as if you has just gone out and bought them,.
Obtaining a sum insured may seem difficult but in reality, it is fairly easy. Just take a pen and paper and go from room to room making lists of the contents in each. Remember, you must include all items, even those you do not use anymore. (Most people fail to allow a sufficient amount for clothing). Also remember to include item that are stored in the garage or garden sheds
Contents policies like building insurance covers are index linked, however for a growing family or someone adding to their belongings on a regular basis, constant reviewing of the sum insured needs to be carried out to ensure that the sum insured are always adequate, particularly after big purchases.
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