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Insurers are fighting for your custom

COMPETITION is hotting up in the home insurance market, with insurers pulling out all the stops to win business. Cash-back, price matching, increased cover limits and online discounts are all being used to lure customers.

The insurer More Than recently increased the total contents cover under its home insurance policy from £60,000 to £75,000. Its customers now benefit from £2,000 of cover for plants (up from £1,000) and £2,000 for outdoor contents, such as garden furniture and children's toys (up from £750).

Head of home insurance David Pitt said: "Customers expect their insurer to protect them from under-insurance. By raising our cover by 25 per cent and increasing the limits for plants and outdoor contents, customers can rest assured that we are doing everything we can to help make sure that they're fully protected."

For comparison, Churchill gives customers £40,000 worth of cover, while householders insured with Direct Line and Norwich Union Direct have to specify if they need more than £15,000 worth of cover. Direct Line and eSure cover garden contents up to £1,000, while some others only offer cover up to £250 for outdoor contents.

Tim Berry, a director at MoneyExpert.com, said one of the biggest dangers with home insurance was being caught with a shortfall between the value of the contents in your home and the amount you are allowed to claim on your home insurance policy.

"Avoiding this can be done quite easily by regularly reviewing your policy and informing your insurer on big purchases you make. A sensible move would be to make an inventory of all the valuable items in the home," he said.

Most importantly, said Berry, ensure the amount of insurance is suitable for your home. Some insurers offer cover from as little as £100, while Liverpool Victoria has a minimum of £125,000. Halifax, Intelligent Finance and Sainsbury's Bank, however, have no minimum cover.

Many of the big insurers are adding incentives to their home insurance policies in an effort to make you choose them over the many other providers out there. So, what should you look for in hunting down the best deal?

Barclays currently promises to beat the cost of your present cover; if it cannot, it will knock down the price and give you £50 in cash.

It is also one of a number of insurers that gives lower premiums if you buy buildings as well as contents insurance. It offers a better deal than the Post Office, More Than and Norwich Union, according to a comparison by insuresupermarket.com of combined contents and buildings policies for addresses in Edinburgh and Glasgow (see table).

About 50 of the 122 policies on the market that offer combined buildings and content cover offer discounts. They include AXA, Barclays, Prudential and Norwich Union.

"It should always be cheaper to buy a combined buildings and contents insurance policy rather than two separate policies," said Peter Gerard of insuresupermarket.com.

But he warned: "Just because they're cheaper, doesn't mean the policies are the same. Read the details carefully to check you are covered for the value of your contents and personal possessions away from the home if you need."

Being covered for personal possessions out of the home is more important than ever. According to Lloyds TSB Insurance, a quarter of the population regularly carry items worth more than £200 - such as mobile phones, MP3 players and cash - about their person.

To get a good deal on home insurance, look for insurers that will give you additional discounts for increasing the security in the home, such as adding locks, security cameras and smoke detectors.

Searching the web might also disclose a good deal, as about one in ten contents policy providers offer discounts if you buy online. They include Halifax, Asda, the AA, eSure and Sainsbury's Bank. Discounts can be as much as 25 per cent.

"Look around for policies offering introductory no-claims discounts that can help keep costs down. Around two-fifths do this, for example Lloyds TSB and Nationwide," said Berry.

In most cases it is best to pay your home and buildings insurance premiums up-front rather than by direct debit.

MoneyExpert research has found that almost half (49 per cent) of home contents policies charge interest if customers pay by monthly direct debit. The average home contents premium is about £150, and opting to pay by direct debit would add more than £28 at an average annual percentage rate of 19.07 per cent. Home contents insurers that do not charge for paying by direct debit include Yorkshire Building Society, Sainsbury's Bank, Royal Bank of Scotland and Marks & Spencer.

'Shop around' tip to cut homeowner costs
MORE than £10,000 a year: that is the average annual cost of running a home, according to an analysis of industry data by Sainsbury's Bank.

It said the annual cost of running a household was £10,048 - £1,389, or 16 per cent, higher than the equivalent cost in 2003-4.

Mortgage repayments accounted for around 59 per cent of the total, and alterations and improvements for 13 per cent.

However, the bank said homeowners could dramatically reduce costs: shopping around for mortgages, energy supplies and home insurance could see the total bill plummet.

It said the average annual gas and electricity bill would have risen by £275 by the end of this year compared with January 2004: more than ten million domestic customers were losing out on more than £1 billion by not switching providers.

The bank has revamped its home insurance, adding specified items cover for higher value belongings, insurance cover for properties with up to eight bedrooms, for properties built before 1850 and for student belongings, as well as a new landlord policy for buy-to-let properties.

Karen Preston, home insurance manager at Sainsbury's Bank, said: "The costs involved in running a home are rising; this makes it all the more important for homeowners to shop around to make sure they are getting the best deals, not just on home insurance but on everything from your mortgage to gas supply."

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