Factors That Make Your Household Insurance Expensive
The main reason your household insurance premium can become exorbitantly high is if you are classified as a non-standard risk by your insurer. Non-standard household insurance risks are those that do not conform to your insurance company’s normal risk profile for which they have set standard rates. The following are some examples of non-standard household insurance risks and the approach taken by the insurer in considering cover.
Subsidence, Landslip or Heave
Most insurers now ask if the applicant's home is free from any sign of damage by landslip, subsidence or heave. If the applicant's answer is 'no', the underwriters will need to obtain a specialist opinion as to the risk exposure. It will be usual practice to ask the applicant for any survey report they have, or a copy of a mining surveyor's report if the property is in a mining area, together with any other relevant documentation.
Provided a surveyor advises that any movement is not progressive, there are no large trees close to the property and problems with defective drains are not suspected, household insurance cover can usually be provided.
If this is not the case, it is likely that a detailed structural engineer's report will be required. The underwriter will require the structural engineer to comment on specific areas including information on:
- Year of construction. This information helps to gain an understanding of the type of foundation the property has.
- An extension: Adding to a house can be a contributory factor in the movement or damage.
- Type of soil the property is built on. In general, sands, gravel and chalk are relatively low risk-while clays, peat and silts have a relatively higher risk of subsidence.
- Where the property is situated. If it is on a slope, this needs to be considered in conjunction with the other contributing factors. If trees or hedges are nearby, full information on tree type etc. will be required. 'Is the property situated on a slope?' and 'are there any trees or hedges nearby?' can be specific questions.
- The extent of any damage in detail. This will include any previous subsidence repairs, regardless of whether they were cosmetic or more severe. Again, a specific question relating to repairs from subsidence will be asked.
Where underpinning has been carried out under the guidance and control of a structural engineer, this will usually be considered favourably by the underwriter as the household insurance risk should have been reduced for that property, even though the risk of subsidence for the area, in general, may be considered high. Terms offered could include an increase in premium and/or a larger deductible.
Tenanted property presents a higher household insurance risk as, generally, it is considered that tenants are not likely to look after the property as well as the owner/occupier.
The number of tenants will also influence the terms to be applied, e.g. one tenant might make the risk acceptable at normal terms whereas six or seven would represent an increased risk.
The underwriter will want to ensure the property is in a good state of repair, and even if it is, extra terms will still be imposed, for example:
- an additional premium. Dependent on the risk, this could be an increase of up to 100%; and/or
- an increased deductible; and/or
- additional exclusions such as damage by malicious persons or vandals and damage by theft or attempted theft.
These properties represent a higher risk in terms of fire and storm damage. The underwriter will require information on the type of thatch as each type will have a different life expectancy. For example:
- straw may last for 15-20 years;
- fibre may last for 80-100 years.
If the insurer is to accept the risk they usually also require that electrical wiring is kept up-to-date and regularly maintained. If open fires are used then a 'spark arrester' will also need to be fitted.
There are a number of specialist brokers and insurers dealing with this type of business. It is usual for a customer who owns a thatched property to bear a large increase in their household insurance premium, possibly as much as up to an additional 100%.
The household insurance risk is higher where the property is unoccupied as, generally, the property is left without supervision and is, therefore, prone to vandalism and occupation by squatters.
As insurers start to use full, localized zip and postcodes, they can better identify properties that are in a flood plain. The household insurance premiums charged and other terms, such as deductibles, will reflect the risk of flooding but will be offered in a competitive market.
Letting of Furnished Property
A request for household insurance by an owner of a property being let out fully furnished would be considered a poor risk.
Such risks are considered unattractive as it is common for:
- tenants not to look after the owner's contents, as well as the owner, would do themselves; in addition
- there is considered to be an increased risk of theft.
Where cover is granted, there will usually be an increased premium to pay and the theft of valuable or high-risk items may be excluded. Additionally, cover for theft may be restricted to that involving forcible and violent entry or exit, and an increased excess may also be applied.
Insurers are often asked to cover students living away from home at university halls of residence or colleges. The risk of theft from students' accommodation is often high as there are usually more people in the building and security arrangements are not always good. For example, the locks may be of poor quality.
Cover can be provided under the contents temporarily removed from the home section, as the student will still be classed as 'children of the insured'. However, where separate cover is requested and the insurer agrees to this, an increased premium will be charged to reflect the increase in household insurance risk. Some insurers and brokers specialize in such schemes.
Where a house is constructed from non-standard materials, i.e. wood, it is not just a poor household insurance risk for buildings insurance, but for any contents contained in it. This is because, if the house was easy to access, burglary would be much easier to commit, alternatively if the house caught fire, there is an increased risk that the contents retained inside it could be easily destroyed too.