How to Avoid Buying Too Much Home Insurance

Most of us have bought home insurance, but have we bought too much? How do we know we are getting the most cover for our money? It is important to buy the appropriate amount of cover to fit your needs; avoid buying too much and try not to buy too little insurance. Over insurance is most common in buildings insurance, while under insurance is more prevalent in contents insurance.

Over Insurance

Over insurance means that you have bought more cover than you could possibly need. This can arise from any number of situations including ones when you covered the same risk with numerous policies, or when your policy actually covers more than what you require. Sometimes, you are given the option to buy legal cover with your home insurance policy, which can help you in disputes surrounding your policy if you feel that you have bought too much. If you have multiple insurance policies such as auto, life and home, some of these policies cover risks on the property. You can see how easy it is to have the same cover under more than one policy. Consider if you would have ever chosen this type of cover if it wasn’t already bundled with your current policy. Would you have bought it? Have you ever made a claim?

In terms of buildings insurance, many companies will propose to give you a buy price equal to the value of your home as an appropriate cover level. However, in the UK, the value of the land itself can add up to at least half of the buy cost. You would not need to cover this, particularly because you wouldn’t lose it if a fire or flood destroyed your home. The only cost you need to cover is the amount you would have to pay to rebuild the structure itself. You can get an idea of how much this would be from this site.

Under Insurance

On the other hand, household contents insurance is often greatly undervalued, mostly because contents insurance policies are new-for-old. In other words, if you have a flood that completely destroys your carpets, you get the cost of new, replacement carpets, even if the original ones came with the house and you did not buy them yourself. Similarly, if you lose a television that is 15 years old, you would receive the cost of a brand new television of the same make and model or a similar one, if applicable. So, in a nutshell, the amount of cover you need to protect your belongings has nothing to do with how much you originally spent on the items themselves, but how much it would cost you if you were to replace everything you have with brand new similar or exact items.

Pay the Right Amount

It is important to shop around to make sure you are paying the right amount for the cover you need. Shop around, evaluate your policy, and compare your needs with what you currently have. Ask your existing company when renewal time comes around if you can lessen the amount of cover you currently have if you realise that you have bought too much. On the other hand, they would most likely be more than willing to help give you coverage that is more comprehensive if you know that the policy does not currently protect items that you need it to.

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Copyright Mary Carroway 2012 All Rights Reserved