Beware the 'too good to be true' home insurance deal

Although home insurers have been pricing very aggressively in recent months, it is more important than ever to know exactly what level of cover you are buying. Although the prices may look very attractive to potential customers, you should be wondering what corners they are cutting in order to deliver these savings.

Home insurance is a necessity for most people, especially homeowners. It covers you against any damage to the building you inhabit and its contents. Certain types of cover may also provide for accidents occurring within the home. Building insurance, which covers the structure itself, is a requirement for anybody with a mortgage. Contents insurance is optional, although recommended. It is usually cheaper to take out both kinds of insurance together, although this is not always the case and it is always worth shopping around.

Over the past 15 years, prices have hardly changed. Accounting for inflation, this makes them significantly cheaper in real terms. According to Sean Gardner, CEO of Moneyexpert.com, the average policy cost £209 in 1995, with the average policy only costing only £215 today.

Price comparison websites have given a great deal of power to consumers. At one stage, loyal customers may have been seen as ‘cash cows’ by insurers. This has now changed, with the public being able to get a picture of the market with one click. The downside of this is that customers may be tempted to opt for the cheapest policy without fully checking what they are buying. Some insurers, for example, will provide cover for loss of or damage to personal possessions outside the home, and others will not. Some policies will also cover costs associated with legal disputes, such as those that might arise with a neighbour. You should also consider whether you require insurance for home office equipment or tools kept in a garden shed.

At the barest minimum, your policy should cover the cost of rebuilding your home should it be destroyed. Although this might seem a little apocalyptic, recent flooding and earthquakes provide sobering reminders of the perils of living on our windy island.

So if your home insurance cover is coming to an end, don’t automatically reinsure with your current provider and don’t just buy the cheapest cover you can find. Shop around, and make sure all your requirements are met by the different policies you are comparing.

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