Some peace of mind at a bargain rate

Autumn Property Survey: Property owners are now spoilt for choice when it comes to building and contents insurance, Clifford German reports

THE GOOD news is that property owners have a much greater choice of insurance for their precious property and its contents than ever before. The traditional ties that obliged buyers to insure their property with an insurance company nominated by (and paying commission to) the lending bank or building society have almost disappeared.

Most borrowers were once only too glad to get a loan, and frequently insured the contents of their homes as well as the buildings with the lender's chosen insurance company. The boot is on the other foot now.

Lenders postponed the day of reckoning once by agreeing to offer home owners a choice from a panel of five or six insurers. But competition between lenders is now so intense that the vast majority will now agree to borrowers choosing, if they wish, their own insurance policies (although many lenders still insist on charging a fee, say pounds 40, to check the chosen insurer's policies to ensure they provide enough cover, and write the lender's name on the policy alongside that of the borrower).

The good news too is that competition, especially from direct writers working over the telephone rather than out of a branch office, has reduced the cost of both buildings and contents cover.

Rates have come down despite some well-publicised problems with subsidence claims that continue to dog property owners unfortunate enough to have their homes built on soils such as London clay. The clay shrinks as it dries in hot summer weather and is liable to open up nasty cracks in homes, especially post-war buildings put up before the great droughts of 1976 and 1977 that first exposed the problem.

The bad news is, or can be, that competition has put pressure on insurers to reduce the cover they offer in order to satisfy the public's preoccupation with finding the cheapest quote and hang the small-print exclusions, at least until a claim is necessary.

The best policies cover property-owners against accidental damage, such as kicking a football through the window or putting your foot between the rafters, as well as acts of God, including the damage done by tree roots going about their normal business and undermining the foundations.

Most insurers want to know the age and type of construction of the property, whether it is detatched or adjoins its neighbours, how many bedrooms it has and what the postcode area is.

They rate the risks of claims against property in pounds and pence per pounds 100 of the property's value, but the premiums are set in bands, in some cases as many as a dozen different bands reflecting the trend of claims experience, and especially elements such as local crime, flood and weather risk, and subsoil types, as well as the details of the property itself. Computers make it easy to divide the country and calculate risks down to the level of local postcode districts, although many insurers then impose special conditions for properties in areas prone to subsidence, such as much of south-east London.

Contents insurance premiums are usually linked to the number of bedrooms, which is a proxy for the amount of contents, although many insurers prefer to insure the specific value of risks, and assess them in relation to items such as the local crime rate and the number and quality of anti- theft devices.

The premiums inevitably vary according to individual insurers and parts of the country.

The small print is even more important in the case of contents insurance.

Frizzell, the direct insurance and banking group, has just issued a 10- point checklist reminding borrowers to examine their proposed policies to see if, for example, they cover personal possessions when you are away from home, whether it covers accidental loss and damage as well as deliberate actions, whether the cover extends abroad, and, if so, whether there are any geographical or time limits, and whether there are limits to the amount of cover given to specific valuable items, such as jewellery or cameras.

Last but not least, Frizzell asks whether the total cover is enough to cover the possible loss of all the items you want insured. It could still pay many home-owners to get the advice of a broker such as RAC Insurance Services to ensure peace of mind.