Only a phone call away

It pays to arrange insurance by telephone, says Simon Read

Because motor insurance is compulsory, only those prepared to break the law go without, but it's a different story when it comes to household cover. Even though a home somewhere in Britain is broken into every 40 seconds many people remain under-insured or have no insurance at all.

You might think it will never be you - but remember, if you are burgled, the cost of replacing all that is stolen or damaged will add up to a lot more than the cost of insurance premiums.

You may recall the great storms that ravaged southern England in 1987. For many of those who didn't have adequate insurance then, the storms are more than just a memory; nine years on, some of them are still struggling to pay for repairs, having had to take out bank loans or second mortgages, and all because they couldn't be bothered to pick up the telephone. Insurance was the first financial service to be sold direct to the customer, first for cars, and then for homes - and nowadays, it is the way most of us buy it.

Direct sellers say they are cheaper because they do not pay commissions to middlemen, whether brokers or financial institutions. Banks and building societies accounted for an estimated pounds 720m of commission payments on sales of home insurance last year, says Direct Line. Ian Chippendale, chief executive, says: "We believe the commissions charged by banks and building societies are excessive. Most people don't realise that by arranging insurance this way it costs them one-third more."

Car insurance is based on vehicle and driver. Millions of motorists are likely to be classed as non-standard risks, because of their age, experience and driving record, or because of the kind of car they drive. If you fall into this category, be prepared to make a few calls before you find an affordable premium.

Privilege Insurance, which will quote on the spot for many luxury and performance cars, highlights some of the ways to keep premiums down: fit an approved immobiliser, restrict cover to one driver and agree to a pounds 250 excess.

There are two elements to household insurance: buildings and contents cover. Buildings insurance covers the structure of your home and is required by mortgage lenders. Contents insurance covers your possessions; it is not compulsory.

Premiums depend on value and location: while some insurers base their ratings on postal district, some have refined their systems to rate properties by full postcode. This can give a more reliable indication of risk - not just from crime, but from structural problems such as subsidence.

Household insurance policies cover you for fire and theft, flood and storm damage, and may include cover for accidents such as broken heirlooms or stained carpets; some also cover loss or damage to possessions when they are outside the home.

Buildings insurance should cover the cost of rebuilding your home - not necessarily its market value. Contents cover is more complicated. Simple policies will be for a set amount, but there may be a limit on individual items. This could easily be breached by expensive stereo equipment or a valuable piece of furniture, which would then need to be itemised separately.

The most common type of contents policy is replacement value or "new for old" cover. It won't matter that your ruined carpet is five years old, since the insurance will pay out for the cost of a new one. The alternative, indemnity policies, pay out the value of the items, so you would be paid out for the value of your old carpet rather than the price of its replacement.