Thursday, March 1, 2018

What You Don't Know About Insurance CAN Hurt You, Ignorance Is NOT Bliss

Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!

As the UK is hit with the big freeze from the ‘Beast from the East’ and ‘Storm Emma’ snow falls, insurance companies will soon be paying out millions of pounds in claims for accidents, burst pipes and flooding.

Whilst we are thinking about insurance, this might be a good opportunity to check your insured items on your home buildings and contents policy, as well as other forms of insurance.

Make sure you have the right insurance cover for your home, and review it every year for price and sum insured.

People often assume that all policies are pretty much the same and only find out the real truth when they put in a claim and get that sick feeling in their stomach when they realise they are not covered for what they thought they were.

For instance, are you covered for losses caused by accidental damage or shattered glass, does it cover your garage or outbuildings, garden equipment, how high is your excess (the amount you pay for each claim) and how much interest are you being charged to spread the cost of your premiums over 12 months? 

Landords, homeowner occupiers and tenants have different needs. Landlords letting unfurnished properties usually require buildings cover, but can also obtain loss of rent and accidental damage for some items like glass.

I recently had a double glazed window shatter for no apparent reason, but had it covered under a separate water pipes, glazing and locks policy for the repair job which cost over £200.

Tenants may wish to insure their contents and belongings against loss through fire, theft or flood damage.

Homeowners normally require both buildings and contents.

If you own a leasehold flat, you may already have buildings insurance cover via a block policy through the freeholder, although not always. You don’t need two buildings policies, but do ensure you have at least one, as people do lose their properties in the event of fire because they have no insurance.

You should check that you have the cover you want within your budget. Companies generally offer ‘standard’ policies, where the cover is basic, and ‘premium’ type policies, which should cover most eventualities and offer all round cover for people with high value contents. I would go for the best policy you can afford.

Two general rules to follow: never under insure the replacement value of your contents or over insure buildings (obviously don’t under insure the rebuilding cost of your property either).

You can check the rebuilding cost of your property on the survey report, or commission a new survey, alternatively the Association of British Insurers offer an online estimate.

Many do the opposite, they have too much buildings rebuilding cover (which is not the same as the open market value of the property, which can be higher or lower than the cost of rebuilding depending on the values in your area) and under insure their contents and personal belongings.

When it comes to claims, the insurance company will reduce the payout by the percentage they feel you are under insured. If you are insured for £25,000, but the actual value of your contents is £50,000, any claim payout could be cut by 50%.

Companies can also refuse to honour a claim, or even void a policy, if you lie on a proposal form or fail to disclose material facts, so read or listen to those questions very carefully.

Another useful money tip. Shop around for the best quotes using online comparison sites, as opposed to approaching one provider or bank. As mentioned in an earlier broadcast, staying with one company for life does not generally pay, so compare the market every year or so to save money.

One of my listeners just emailed me today saying she had saved over £2000 on her car and contents cover by using a comparison site after listening to Money Tips Daily!

I am guilty of this myself, staying with one mobile phone provider and a well known breakdown cover company for over 20 years. However, I have recently negotiated a better deal with both after I noticed they were increasing my premiums!

Another tip. Watch out for the cost of paying your premiums monthly by direct debit.

You are effectively taking out a loan with a finance company – and you will be credit searched leaving a footprint on your credit file - and the interest rate can be as high as 39% pa! You can save money by paying by annual Direct Debit or even on a credit card, which would probably be a lot cheaper.

Make sure you are covered for valuable items like gold and jewellery, designer bags or watches, and that they are covered for loss or theft outside of your home, for example when you are wearing them, commonly known as ‘All Risks’ cover which will cost a little extra but I think is worth it because that’s when you are most at risk of loss.

Further tip. Have you declared the correct value and can you prove legal ownership?
Undeclared jewellery brought in from abroad without paying the duty may not be covered.

Many years ago, a Middle Eastern client of mine had a burglary and the thieves stole £10,000 worth of gold and jewellery. Because it was quite a large claim in those days, the insurance company sent a loss adjuster out to see him to assess (well, reduce) the claim and I attended the visit.

The first thing we discovered was that he was way under insured and had not disclosed the amount of ‘valuable’ items.

The assessor then asked where he bought the jewellery and he said in Egypt. He was then asked to show proof that he’d paid the duty when he brought the jewellery into the country. He said he hadn't because it had been brought in over a number of trips and it had just been worn by him and his wife.

The insurance company refused to pay out on the jewellery items as they said they were not legal. The company was reputable and did come to a fair settlement however, which shows that choosing the right insurer based on claims payout and service is sometimes more important than just the price.

If you have a large claim, particularly in the commercial world, you can employ a loss assessor to act on your behalf against the insurance company and their loss adjuster.

Bonus Tip... Have your jewellery valued and photographed, as you may not have receipts especially for family heirlooms. 

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