Turned down: one in five home insurance claims are rejected
A surprisingly high number of home insurance claims are turned down. Here's why.
More than one in five home insurance claims are rejected according to new figures released by The Association of British Insurers (ABI).
Just 79% of cases were successful, which is shockingly low compared to 87% of travel insurance and 99% of motor insurance claims.
The ABI has published the industry-wide figures for the first time, focusing on claims made during 2013 and 2014.
The data looked at 6.9 million cases made up of 4.3 million motor insurance, 1.8 million home insurance and 800,000 travel insurance claims, handled by 19 insurers.
The analysis revealed that the average successful home insurance claim paid £2,520, while the the typical combined buildings and contents annual premium was £290.
When home insurance doesn’t pay out
The ABI said the main reason for a claim being turned down was a failure to maintain the property, leading to wear and tear or serious damage.
For example claims for roof damage caused by faults like a leak, which had been left to get worse, were unlikely to succeed. However claims for roof damage caused by a storm impacting numerous homes would.
An ABI spokesperson said home insurance was primarily designed to cover sudden incidents such as flood and storms, as opposed to something that occurs over a period of time.
Another reason for rejection was the value of the claim falling below the policy excess. The excess is the amount you have to hand over before a policy will pay out when you come to make a claim. Often people will bump up their excess to make a premium cheaper, which can come back to sting them later on.
The final main cause of a failure to pay out is a policyholder not having the right kind of cover. Many policies for example don’t come with accidental damage cover as standard and charge for this to be an extra add on.
The ABI said it wanted to improve awareness about what people are getting wrong about home insurance, to drive successful claim rates up.
Huw Evans, ABI’s Director General, commented: "Contrary to popular belief, insurers want to pay honest claims. It helps nobody when customers have bought the wrong product or have not disclosed important information… Buying insurance should never just be about getting the cheapest price in the quickest time possible, it should be about ensuring you have the right product for your hour of need."
How to find the right cover at the best price
Avoid letting your policy automatically renew. Loyalty rarely pays when it comes to home insurance, so it’s important to shop around for a new deal every year using comparisons sites and looking direct with insurers like Aviva and Direct Line.
Building insurance should cover what it costs to rebuild your home, rather than the market value, and contents insurance should cover all the valuables in your home including what’s in the attic, garage and shed. You should also carefully consider whether you need accidental damage cover which doesn't always come as standard.
Increasing the security of your home can help reduce premiums. Investing in some high security locks, putting locks on your windows and installing an alarm system can keep costs down.
It’s also a good idea to avoid paying for your policy in instalments as this option normally attracts interest. Paying it in one go will save you money in the long run. Alternatively putting the cost on a 0% credit card is a better way to spread the payments. Read The best 0% purchase credit cards.
More on insurance:
How to spread the cost of insurance
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Life insurance: the insurance most of us should resolve to have in 2016
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