Home Buildings Insurance – Where Are the Risks to You?

Picture the scene – you have just opened your annual renewal documentation and the premium seems reasonable. What do you do? Some will hit the “Go Compare” websites and get cheaper premium quotations. Some cannot be bothered and simply file the paperwork (doing nothing is a great option as this usually means your policy will be automatically renewed).What is wrong with this little scenario?The answer is “nothing”, in many cases. However the right answer must be based on your own particular circumstances. I would argue that never has a time existed whereby are you more strongly recommended to STOP, THINK and REVIEW before you decide what to do.Question ONE – Has the policy cover changed in any way OR does it include all that you need? Often the excess payment is incremental based on what is being claimed; Often the list of exclusions has been extended but you would need to very carefully read the small print to find such changes; often cover has been limited in some way. You need to make sure that you are getting value-for-money before you decide to renew.Question TWO – Have you completed any works, improvements, alterations that either increases what needs to be covered or which might adversely affect the Buildings Insurance Company view of what risks they are taking in extending cover to you. Remember you are under a duty to inform Insurers if anything has changed or is unusual.These two questions are fairly simple but do you know the real import of them? Do you know what might happen if you ignored the ground rules, buried your head in the sand, renewed blindly and then had to make a claim during the next year?Firstly you have to understand what insurance is not. It is not a cover-all-get-out that absolves you from well maintaining your home. If you have something that you know is going to wear out after a finite period, you ignore it, it fails and causes house subsidence, are you covered? Probably not but this is a grey area. EG: If you have underground drains made from pitch-fibre your drains will fail very quickly now because we know they have not stood the test of time.What would happen if you planted trees over your drains or too close to your home and in ten years time the tree roots cause damage that results in house subsidence – are you covered?What happens if you completed an attic conversion, installed a Conservatory, replaced your old, single glazed windows with state-of-the-art double glazing and you fail to tell Insurers and then have a claim that includes these items? Are you covered bearing in mind your cover did not reflect the added cost of these items?If your insurance level was correctly assessed many years ago and has been index-linked ever since and you make a claim and Insurers say you are under insured and will not pay out the full amount to reimburse you? Have you a case for complaint or not?If only the answers were simple.First let’s put to bed a few myths: The home value has nothing to do with the correct “sum insured” for Insurance rebuild purposes: Index-linked policies can easily get out-of-sync over the longer term (leaving you either under-insured or having paid inflated premiums unnecessarily).In recent years some Insurers have decided to de-complicate Buildings Insurance and simply tell you that having taken data from the Loan Valuation Report they automatically insure your home for the correct amount. This is great, provided the Loan Valuer has got it right (and do not forget that often you do not nowadays get a copy of the Valuers Report to be able to check these things).In my own case my Mortgage Company simply stated that my home is now insured as a two bed house. I explained to them it was built as a three bedroom home but that I use it as a two bedroom home. After eight years residence here I still cannot get a simply letter to categorically state that I am not under-insured (anything a staff member cannot understand gets placed at the back of the queue and is never actually answered).So – how can you cut though all this nonsense and ensure you have good, effective cover?In fairness the Insurance Company industry has begun to get its act together but with increased competition for short term customers (introductory deals that are not renewed OR companies placing the best deals with new customers rather than with loyal existing customers) we are all changing Insurers with greater frequency.Upon your annual Buildings Insurance renewal PROinspect suggest a STOP and THINK policy review would be wise. The following questions are core data needed to assess how you approach your Buildings Insurance renewal:-1- have you improved your property in any way?
2- does anything influence your home or has that degree of influence materially increased?
3- have you adequately maintained your home so as not to allow risks to develop?
4- if your cover is index-linked, how many years has this indexation applied?
5- has the offered cover changed in any way at all compared with last years cover?
6- if you have gone to a Comparison Website are quotations all on the exact same basis?
7- do you live in/on a floodplain?
8- do you live in an area of shrinkable clays?
9- is your home and site liable to surface water flow damage (not associated with sea and river flooding)?
10- do you live in an area prone to coal-mining, landslip, radon gas, etc… (high risks)?
11- have you made any claims in the last year? Have these been resolved/agreed/closed?Whether you would be well advised to take your business elsewhere, at lower annual premiums, depends of the answers to these questions. If your home is unchanged within its risk-free location and environment then the chances are that accepting the lowest premium for an agreed and defined level of cover is just the ticket for you.However, for the rest of us, millions of occupiers, the situation is much more complex. The rest of us must carefully weigh Premium quote -V- Degree of Cover -V- Risk Assessment (of your own home and what affects it).The quote is a given (assuming you have fully declared all relevant information to Insurers); the degree of cover is a given (but look out for small print changes or exclusions); what is not a constant is the Risk Assessment aspect of the renewal.At what stage does increasing vandalism in your housing district need to be declared to Insurers on renewal?How do you know if tree roots are affecting your drains if when you flush the toilet the waste goes away freely?If your home has never flooded, and is not in or near a floodplain, how do you know if your home is at risk of water damage due to exceptionally high rain storms due to climate change?The name of the game is to know you are one step ahead of Insurers and you do not place Buildings Insurance cover at risk. To achieve this you must understand what influences both insurance premiums and your home.Let me explain one further aspect to consider: you have a nice home and have never had any problems or made any claims. On renewal you consider the premium quote is too high and go elsewhere knowing cover is slightly restricted but you will be saving £150 during the year.Suddenly, nine months later, your home begins to crack and distort – you have subsidence. The Insurance Company Loss Adjuster says structural underpinning of the house foundations is needed plus many reinstate works. The cost is £75,000. Your excess payment is £1,000. However, then your troubles really begin……Insurers say that the cause of the subsidence is a fractured drain caused by excavations associated with the paved patio you laid yourself behind the lounge after you had a large tree removed. This work was completed 18 months ago – 6 months before you changed Insurance Company. In essence the cause of the damage, and claim, pre-existed the start of the Insurance cover and you did not declare the risk.If you were under-insured by say 25% then any claim at all would be reduced by 25%. But, in the example just quoted above the Insurance Company could decide not to honour your claim at all. Conversely, new protocols between participating Insurance Companies might mean that if any liability is accepted then the current Insurer will pay part and the previous Insurers a further part.So, a summary might be to say that premium level is not everything. Look beyond the premium, check the degree of cover and then Risk Assess your home and what influences it. Have you done anything that might trip you up later on when you have to make a claim? However, if funds are low and you have no alternative but to look for the cheapest possible premium quote then do so but whilst perhaps setting certain minimum degrees of cover for certain risks.Unfortunately we have recently entered a period of high subsidence risk due to low rainwater rates over the last year or so. Cyclical patterns suggest subsidence rates will soon soar and so changing Building Insurers might just be one risk too far if you live in a clay based soil area.At PROinspect we ensure we consider any survey completed for customers includes appropriate advice about Insurance risks of flooding, storm damage and structural movement. By this route you can reduce the risks you take. In exceptional cases we might consider the risks are so real and high such that Market Value is adversely affected – our report opinion of Value may enable you to purchase at a discounted sum to allow for such risks.