Most people set up their home insurance policy, then forget about it. They might remember it once a year at renewal, and if they’re sensible, they will then shop around for a cheaper quote.
But once they have set up a household buildings or contents policy, most people don’t look too closely at how much cover they have, and whether it still meets their needs.
Do your homework if working from home
If your circumstances change, you need to change your home insurance policy as well. The changes might seem relatively minor to you, but they might be important to your insurance company.
Say you start working from home, setting up a small business run from one of your spare rooms. Your insurer will have set up your policy assuming that it was only insuring standard domestic uses, and may want to adjust cover slightly if you run a business from home, especially if you have expensive equipment. Or maybe you’ve just completed an extension on your property, or added a conservatory. This is likely to have increased the rebuilding costs of your property, so again, your insurer needs to know. You may have to pay a slightly higher premium.
Many contents policies operate on a “bedroom-rated” basis. They ask how many bedrooms your house has, then either offer you unlimited cover, or set a standard limit on the amount you are insured for, say, £40,000. If you have built a new bedroom on your property, you need to tell your insurer so they can be do their sums.
There are plenty of other reasons why you might need to update details with your insurer. You may have just spent thousands of pounds on some fancy new home entertainment system. You will certainly want your insurer to protect them, but it won’t automatically do so.
Even if you have unlimited contents cover, tell your insurer if you have bought an expensive one-off items. Many policies have relatively low “single item” limits, typically no more than £1,500. If your new plasma screen TV, antique vase or gold necklace is worth more than that, you need to tell your insurer to get it on cover. Again, you might have to pay a higher premium.
Get the correct cover
Maybe you’ve realised that you have underinsured your household contents. It is important that your insurer has the correct figure. If your insure your contents for, say, £25,000, but when you claim your insurer discovers they were worth £50,000, you may only receive half of any losses. So if you claim for £2,000, you might get just £1,000. Buildings insurance covers the cost of rebuilding cost of your home – not its market value. If you haven’t remortgaged or moved house for years, this figure might be out of date, leaving you dangerously underinsured.
You can work today’s rebuilding costs using an online calculator from the Association of British Insurers. If the updated figure is different to the one on your policy, again, your insurer needs to know. You should also contact your insurer if you have changed address, or your marital status or occupation has changed.
Amend and send
Your first step is pretty straightforward: contact your insurance company. Some insurers even allow you to amend your household insurance policy on its website, which may be fine for relatively simple changes. If you need to make more complex changes to your policy, it may be wiser to ring your insurer instead. For simple changes, there is unlikely to be any charge. If the amount of insurance cover you need increases, you can expect your premium to rise.
But don’t use this as an excuse to avoid updating your policy: it could backfire if you have to make a claim, and the insurer discovers the truth. It might reduce your payout, or reject it altogether. Once you have amended your policy, your insurer will send you new documentation. It will also send you details of your new premium.