Before you buy house insurance on price alone read this

mic200202

As an insurance advisor I provide customers with house insurance on a regular basis.It often shocks me how often that people buy this cover without any real advice, as if all insurance is the same (the only difference is cost).

Not long after I first started providing house insurance I had an incident which I often tell other customers.

A customer I had arrange a mortgage for was nearing her completion date.As I was some distance form her,when I was chatting on the phone she mentioned that the lender (Abbey at the time) had given a quote for house insurance.The rebuild cost was set at £60k which was the minimum recommended cover on the survey report.She was going to just go ahead with it when I realised the Legal & General (who I was an agent of) had came out with a new policy which didnt have a rebuild cost.Instead it had an overall limit of £300,000.As the policy was just slightly more expensive than the Abbey one she went ahead with my recommendation.

2 months later I had a call from her.She was in a hotel.There had been a flood and water had came into the house.Thinking this may have caused some flooring damage etc I asked if she had been in touch with the insurer.In fact, the water had flooded the house to over a metre deep.A loss adjuster had been out and had assessed that the house needed to be rebuilt completely.The rebuild cost was assessed at £140,000 - almost £80,000 more than the insured sum if she had taken the Abbey policy.

Many people would assume that well, ok, she would at least have got the £60k.Not true.When assessing a claim the insurer would assess if you are underinsured and reduce any claim in proportion to this amount.So, for my customer, they would have siad you are underinsured by 60% and then reduce the maximum payout by this proportion.

I have looked at all the comparison sites and found that a lot of policies hide improtant details and move around excess's.Many of them seem to be just collecting data to sell on to someone else.Some even carry out credit scoring as the policies are paid for using credit.This scoring has had an adverse effect on some customers applying for mortgage as multiple searches have been carried out.

The moral of the story is if your're not completely sure of what house insurance you need or the details of what the policies contain then go to a broker.Most mortgage advisors will actually advise you on these (as opposed to you buying blindly without any protection).

vaio

mic200202 wrote: »

.........Many people would assume that well, ok, she would at least have got the £60k.Not true.When assessing a claim the insurer would assess if you are underinsured and reduce any claim in proportion to this amount.So, for my customer, they would have siad you are underinsured by 60% and then reduce the maximum payout by this proportion.........

Surely that only applies if the claim is less than the correct sum insured?

ie sum insured £60k actual rebuild cost £100k actual damage claim £50k actual payout £30k

so, your punter, being under insured by 60% would have got 40% of the claim value or £60k which ever was the smaller.

On a total loss like you describe she'd have got the full £60k

And that's before you start thinking about the liability/fairness issues surrounding a punter who took out cover based on the figures given in the survey report, it's why the FOS exists and why surveyors have PI insurance.

kingstreet

I suspect if she had insured with the lender and for the lender's recommended rebuild cost/sum insured she would have got the claim settled.

Not good business practice though, TBH.

I must confess I do tend to use bedroom-rated cover myself. £300k, £500k or unlimited blanket buildings cover tends to mean you have no worries about under insurance, particularly in the area I work.

ACG

I think the point is, she may have got the full amount but how much hassle would it have caused?

In all honesty, i only use one insurance company. I do that for a reason...i only recommend companies i would be happy to use myself. Theyre not the cheapest but by no means the most expensive.

I made a thread on here a while ago along similr lines, you buy the cheapest policy you get less cover...somewhere down the line it wont be like for like. For some people cheapest is fine, but for the majority its probably not - i dont want people knocking on my door complaining so id rather get less sales and recommend something im confident in than the other way round.

mikey72

ACG wrote: »

In all honesty, i only use one insurance company. I do that for a reason...i only recommend companies i would be happy to use myself. Theyre not the cheapest but by no means the most expensive............

How do you know that one company is the best for every individual customer you deal with? Is that even allowed?

FlameCloud

vaio wrote: »

Surely that only applies if the claim is less than the correct sum insured?

ie sum insured £60k actual rebuild cost £100k actual damage claim £50k actual payout £30k

so, your punter, being under insured by 60% would have got 40% of the claim value or £60k which ever was the smaller.

On a total loss like you describe she'd have got the full £60k

And that's before you start thinking about the liability/fairness issues surrounding a punter who took out cover based on the figures given in the survey report, it's why the FOS exists and why surveyors have PI insurance.

You are correct, average will not apply to a total loss.

Also, every Abbey policy I have seen where they also have the mortgage on in usually states something like: Sum Insured £60,000, or whatever the rebuild cost is.

property.advert

Years ago, before the internet and email, it was nigh on impossible to get policy limits and exclusions before purchasing a policy but now it is as simple as a few clicks of a mouse or a free phone call.

Yet however simple it is, Joe Public never ceases to amaze with their laziness and love of race to the bottom penny pinching.

dacouch

If you have followed the advice of a surveyor when selecting a building sum insured, the Ombudsman will normally require your Insurer to meet the full value of the claim even if it exceeds your sum insured. You may be required to pay the difference in the premium.

vaio

ACG wrote: »

I think the point is, she may have got the full amount but how much hassle would it have caused?..........

I think a more important point is that an insurance advisor doesn't understand something as fundamentally basic as the under insurance example he gave in the OP and presumably advises his clients on that mistaken basis.

olly300

mikey72 wrote: »

How do you know that one company is the best for every individual customer you deal with?

S/he probably loses business from not having a few companies.

There are quite a few people who work from home or run businesses from home who can't get standard insurance.

mikey72 wrote: »

Is that even allowed?

I'm sure you have to state in very small print the companies you are tied to. Large financial companies do on their small print.

mikey72

olly300 wrote: »

S/he probably loses business from not having a few companies.

There are quite a few people who work from home or run businesses from home who can't get standard insurance.


I'm sure you have to state in very small print the companies you are tied to. Large financial companies do on their small print.

Tied to just one company? For every customers needs? I suppose some do, thinking about it.