One of the more overlooked aspects of the house price mix has been the subject of property related insurance. When house prices were so high and taking so much of the disposable income, this essential part of home ownership may have taken a back seat. Then, when the downturn came some owners may have stopped their premiums in order to save money. Insufficient and inappropriate insurance cover is a short sighted saving, which may end up actually costing you money. Sufficient cover for your needs should always be put in place.

Insurance should be able to give you peace of mind and protect the value of your possessions and earnings. One point some forget is that insurance can also protect your credit rating, because you will be able to keep up loan/mortgage payments when without insurance you would have had no money. It can be a real lifebelt in times of need.

Boring, complicated and in the end a rip-off are sometimes the initial thoughts that spring to peoples’ minds when considering insurance. But it is too late to regret not having it when the bread-winner dies, the redundancy notice is thrust in your hand or that life changing accident occurs. There are today many redundant employees and those that have been flooded who are in this sad position. And believe it or not, insurance companies are more than happy to pay out when the policy was properly written and everything disclosed to them. Some even advertise their payouts.

Now what type of insurance cover are we talking about here? Now first there is ‘assurance’ and ‘insurance’. I will be very general here. Assurance is where you pay money and you (or your estate) will definitely get it back (hopefully with a profit) later as long as the life company is still solvent, a Whole of Life policy works like this. On the other hand insurance is where you pay money for a certain period and the policy only pays back on a set of specific occurrences during a set period of time. This is the basis on which car and simple life insurance policies are written. Insurance policies are further split into life policies and General Insurance (GI) policies.

Residential housing would normally be covered by life and GI products. But where to start? There are a large number of different policies available from many providers so how do you go about getting the best deal? It may be tempting to go straight to the Internet but this may only give you half the story, especially if you don’t understand the basic types of products available to you.

The first step is to understand what cover you already have in place. You may have old cover, endowments with life cover, employment related cover etc. Dig out the paperwork and decide whether it is still relevant. Be wary of including employer related benefits in your decisions as you may change employers in a couple of years.

Next decide where you are going to source your insurance. There are three sorts of insurance sales people: ‘single tied’ who deal with only one company (usually pricier), ‘multi-tied’ where maybe half a dozen companies are available to choose from and ‘whole of market’ where just about every company can be chosen from. The insurance broker you are dealing with is required by law to declare which of these options they offer. Generally a multi-tied or whole of market service will prove cost effective. Mortgage brokers offer these services but you don’t have to get your insurances through them.

A good broker will explain the different sorts of insurance available. But be aware their job is to sell you as much as they can and one of the tools they use is ‘disturbance’. This is the use of techniques to paint vivid pictures that make you possibly more vulnerable to sales patter. Remember, it is your money so do your own risk assessment and stick with it. It is worth considering though that if insurance was free we’d want to be safe and so take everything on offer. Another old insurance adage, “I’ve never met a widow who thought her husband was properly insured”.

I will be following this up with articles covering the different types of Insurance policies you should consider when deciding to protect yourself in relation to your home ownership.

You may also be interested in:

Choosing a mortgage adviser

Mortgages – Interest Only or Repayment

Mortgage related insurance – Life Insurance

Tags: finance, home insurance, House Price Bubble, house price news, insurance, life insurance, News

This entry was posted on Tuesday, November 24th, 2009 at 8:24 am and is filed under House Price Bubble. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.