One of the issues we may face when people ask us to handle their home buildings insurance claim is that they don’t have sufficient cover. Often this is because they took out their policy a long time ago and have failed to review it and update it regularly to reflect current market values.
Some research just published may go some way to explaining why this is the case. It seems that many people mistakenly believe that they are obliged to buy their buildings insurance with their lender when they take out a mortgage.
According to Gocompare, 1.6 million UK householders have bought their insurance from their mortgage provider, and 30 per cent of these believed at the time that this was compulsory – which it is not. Indeed, six per cent report that they understood from their lender that it was mandatory.
It goes even further: 24 per cent then think that, once they have bought this cover, they are not allowed to change to another provider, which means they can’t shop around for the best deal. And this also makes it more likely that they won’t review the cover to make sure it still provides what they need if they need to make a claim.
For some, taking out insurance through your mortgage provider is simply an easier option at a time when there is already so much to do. And of course it is possible that it will be a good deal. But some people feel that mortgage providers put pressure on them, implying that taking out insurance through them will help in having the mortgage application accepted.
Gocompare describe this as a ‘mortgage-linked insurance trap’: not only are you likely to be paying over the odds, it may stop you ensuring it continues to cover what you need. As always, our advice is to shop around, to read the small print before you buy, and to review your cover regularly.