The Government’s Help to Buy scheme and the soon to be introduced Help to Buy ISA mean there are good incentives currently available for first-time buyers to try and get on the property ladder.
But buying a new home is an emotionally exciting time, and in the rush to get your hands on the keys, it’s easy to overlook just about the most important thing you need along with a mortgage; home insurance.
Most mortgage providers insist on proof that you have cover in place before you exchange contracts, so not having it isn’t really an option.
Understanding cover: Buildings and contents
However, it’s still very important that you understand why you need it and, for those lucky enough to be buying somewhere in cash, you forget to take cover out at your peril.
A policy includes both the structure of a property, such as the walls and foundations, and your possessions, including laptops and phones as well as sofas and white goods, against damage and loss.
‘Buildings’ insurance covers the structure and ‘contents’ insurance the items you keep inside it.
Buildings and contents cover can be bought separately if required – landlords might only need buildings cover, while tenants only contents, for example – but it’s generally cheaper to buy them together under a packaged ‘home insurance’ policy if you need both.
Don’t wait until the day you move in
As you’re legally responsible for a property from the day you exchange contracts you should make sure cover is in place at that moment (as already mentioned, it’s hard not to have arranged this as it’s a requirement of all mortgage lenders).
Remember, however, that you’re not obliged to buy your home loan lender’s cover; the chances are it will be quite a lot more expensive than you could get elsewhere.
Confused? Help is at hand
Buying cover for the first time can be a little confusing. Getting to grips with what a policy ‘excess’ is, and knowing whether you should buy optional extras such as accidental damage cover, for example, isn’t easy.
An independent insurance broker can be extremely useful as they can help you through the process, making sure the cover you end up with is appropriate for your cover needs and the property you’re buying.
Home cover tips: Don’t buy the first thing you’re offered
The key is not to panic and buy the first policy you’re offered after a quick look online.
Here are some of the key things to look out for and take into account when weighing up the cover you’re offered:
Always shop around – Don’t simply accept the cover that your bank offers you with your mortgage. Use online comparison sites and independent brokers to compare prices and policies.
Check if it’s ‘new for old’ – The very cheapest policies might only work on an ‘old for old’ basis. In other words, second hand is replaced with second hand. If you want the more standard ‘new for old’, make sure that’s what’s on offer.
Combined deals – You can buy your buildings and contents cover separately if you want, but it usually costs more. A simple check by getting separate quotes will show this to be the case.
Accidental damage – Accidental damage is a key ‘optional extra’ offered by many providers (i.e. it costs a little extra). So if you want to make sure you’re covered if you accidentally drive into the garage wall, or drop your new laptop down the stairs, you need to make sure your policy includes it.
Away from home – As with accidental damage, away from home cover is often an optional extra. This ensures most items you take with you when you leave the house are then covered for loss, damage or theft, and even accidental damage depending on the policy.
Rebuild costs – Many home cover policies set a fixed maximum sum for how much the structure of your home is covered for, but not all. You need to ensure this would be enough to have it completely rebuilt from scratch (if it were destroyed in a fire, for example), otherwise you could be left with a home you can’t afford to rebuild.
The level of ‘excess’ – Setting a higher excess usually lowers the cost of premiums as you’re basically agreeing to cover more of the first part of a claim than is set as standard. This reduces the financial risk for an insurer, so they usually offer to lower your premiums in return.
Single item and total cover claim limits for contents – You need to double and triple check that the maximum claim limits are sufficient to cover you, for individual items and all of your possessions. Don’t forget contents cover isn’t just for the things you carry around with you regularly; as well as TVs, laptops, watches and jewellery, it also covers fixtures and fittings such as sofas, curtains, carpets, fridges and wardrobes.
Don’t under-insure – It’s better to over-insure than under-insure. Even if you’re deliberately generous in your estimations, the difference in policy cost will probably only be a few pounds a year but you won’t be left sorely out of pocket if the worst happens.
If your home is your haven, you’ll want it to have the best protection. Compare home insurance quotes from our range of handpicked insurers and tailor a policy to suit you. For more information, you can call our experts on 0330 0600 600 or visit www.policyexpert.co.uk/contact for more ways to reach us.
Published 11 June 2015