Watch out for these home insurance traps

By Lana Clements 12.12.2011

When buying home insurance, don't fall foul of these tricks and traps.

It's often advised that when buying home insurance you shouldn't just compare price, but also look at the terms and conditions of different policies. If you only go by cost, you risk leaving yourself without adequate cover for your needs, which means you could have to pay out much more later down the line.

Mike Powell, Defaqto insight analyst, says: "Choosing the cheapest option could be one of the most expensive mistakes someone ever makes, especially when they realise their insurance policy doesn't provide the cover they expect or need.

"Although the cost of any insurance is always going to be an important factor, the features and benefits offered by a policy should always be the main consideration."

But no one has time to read entire policy booklets from every single insurer, so which areas should you be comparing?

Alternative accommodation

If you have to move out of your home because of a disaster such as a fire or flood, it could be a long time before you are able to return. It can take months on end for a house to dry out after flooding and repair work can begin, while a severe fire can involve rebuilding and refurbishing a home from the ground.

Homeowners take out home insurance to cover precisely these kinds of events, and most will expect this will include covering the costs of temporary accommodation. However, this may not always be the case.

There are wide-ranging variations between policies for alternative accommodation, with monetary limits for costs ranging from between £12,500 and £100,000, according to research company Defaqto.

At this time of year, when homes are particularly at risk from flooding because of frozen pipes, it's a good idea to check cover is adequate, particularly if, in the event you had to move out of your home, you wouldn't be able to temporarily stay with family or friends. 

Cover for high risk items

The contents of today's homes are ever more filled with expensive gadgets from phones, laptops and televisions, the value of which can run into thousands of pounds. However, most home policies cap the value that can be claimed on any single item.

Defaqto says that limits on policies start from £750 - the cost of a MacBook, televisions and other gadgets often cost more than this – which means if you have something of a higher value you won't be able to claim for the full cost of replacing it.

If you have a high value item you may also have to list it separately or it may not be covered. So if you get a new expensive gift for Christmas, be sure to ring your insurer to find out if you need to change your policy arrangements.

Replacement items

Most insurance providers will provide "new for old" cover on your items, which means that you will be reimbursed for the price of buying a new television, even if the one you had may have been a couple of years old and therefore would not be worth the same value as new.

However, it is something that you should check in your policy, as it can be a nasty surprise to find out that you will only be covered for a fraction of the price of a new item.

Another trick to watch out for after a claim is made is that some insurers insist you replace items through their preferred suppliers. Insurers negotiate lower prices for sending all their customers through certain companies which will cost them less. However, this could limit your choice or mean that you don't get the same brand you would have preferred in replacement.