California burning

The California forest fires currently raging out of control are estimated to have caused more than $1 billion in damage already and forced more than a million people to flee their homes. A vast area from Malibu to Mexico has been affected with one person killed and dozens injured.

Celebrities including Mel Gibson, Halle Berry and Olivia Newton-John have been among those forced to flee and hope that the fires don’t hit their homes. More than 2,000 homes have been destroyed so far.

President Bush has declared a state of emergency comparing the devastation to the damage that was done by Hurricane Katrina.

Major disasters such as fires and floods highlight the need for insurance and MoneyExpert.com shows you what you should be thinking about when it comes to contents and buildings insurance..

Insuring the basics

You first have to decide how much you are willing to pay. After the mortgage, council tax and motor insurance the payouts on home insurance rank among the highest outgoings for most people.

You might just want to insure your home’s building work. Mortgage lenders will insist that you at least take out insurance for your home.

Buildings insurance is the bare minimum and will pay out for damage to your house. In the extreme, this would cover you for the cost of totally rebuilding your home.

Tally up your possessions

You should also cover your possessions by taking out contents insurance, too.Put together a list of everything that you might want to replace.

The value soon adds up, but don’t get carried away. The more you insure, the higher your premiums will be. But don’t underinsure because that can count against you when you make a claim.

Accidents will happen

You should also consider accidental damage cover. Almost 4,000 people die in accidents in the home every year.

While basic insurance will cover your buildings and contents against storm, flooding and malicious damage, you will need accidental damage cover if you cause damage accidentally, such as cigarettes burning the sofa or Dad putting a screw through a water pipe.

Take a look at whether you can afford an excess, which is the amount you pay before the insurer chips in. The more you are willing to pay in excess in the event of claim, the lower your premiums will be.

Where do you buy a policy?

Selling insurance is big business. Every homeowner needs it to some extent.

Some mortgage lenders make it a condition of taking out a mortgage with them that you also take out a household insurance policy with them, too.

They might offer you a preferential mortgage deal but cash in on the insurance cover. So weigh up the total costs and look around for a competitive insurance deal to see if you can save on the overall package.

You can find a competitive deal for you by clicking through on the insurance button on MoneyExpert.com.

Potential pitfalls

Always look at your insurance policy to see exactly what you are covered for. In many cases, there are just as many exclusions as there are inclusions in home insurance. You might think, for example, that you qualify for a payout if heavy rain damages your roof. But if there are too few inches of rainfall, then it won’t qualify as storm damage.

Always look for a better deal

Household insurance policies usually run out after a year, unless you are tied in for longer with compulsory insurance from a mortgage lender.

So always take the chance to look for a better deal every chance you get to renew. In some cases, you could save up to £100 or more a year by switching insurers.

There are many insurers offering lots of different deals. The best policy is look as widely as possible across the market for the best possible deal for you.

Handy hints for home protection

  • You should consider fitting a burglar alarm system. Insurers will often reduce your premium if they know you have a good system in place. Good locks on doors and windows are a necessity.
  • Fitting smoke detectors is a good way of minimising fire prevention – and improving your chance of survival.
  • Always know where stopcocks are in your home so you know you can switch off the water supply in an emergency.
  • And to minimise subsidence damage, make sure any trees and large shrubs near your home are pruned regularly. They are increasingly becoming a source of structural damage to homes as summers become dryer – global warming is here to stay!

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