Inadequate insurance can cost a fortune

Check you have the right cover before a disaster, not after, says Harvey Jones

Your home is by far the most valuable thing you own, so make sure it's properly insured against nasties such as burglary, fire, flood, subsidence and accidental damage. One in six homeowners has no buildings insurance, which protects your bricks and mortar plus any permanent fixtures such as fitted kitchens and bathrooms. And one in four has no insurance for their home contents, which covers everything you would take if you moved.

Going without could cost you tens of thousands of pounds, so don't take the chance. When buying or renewing cover, shop around and scrutinise the small print of your chosen policy. Most people only discover what is - and isn't - covered when they make a claim.

The average premium for buildings cover is pounds 209, and pounds 151 for contents, according to AA Insurance; but you can cut your premiums by up to 30 per cent by shopping around. Insurers such as Churchill Insurance, Esure, Direct Line and Tesco Personal Finance offer discounts for buying online.

Watch out for premium hikes at renewal. Insurers often woo new customers with tempting discounts, then sneakily boost premiums in future years. You may get a discount if you buy buildings and contents cover from the same insurer, plus further discounts if you also have its motor insurance. But make sure rates on all these products are competitive. You are not obliged to buy cover from your mortgage lender, which can include a hefty mark-up. Again, shop around.

Calculate the correct level of buildings cover. This should cover the full cost of rebuilding your home - not its market value. If you have converted your loft or added an extension, increase cover in line with the new rebuilding value.

Don't underestimate the value of your contents. If your belongings are insured for pounds 15,000 but are worth pounds 30,000, your insurer will only pay half of any claim. Alternatively, you can choose a policy offering "unlimited cover".

Tell your insurer about any expensive individual items, says Neil Thomas, director of IFA Simpsons, of Brighton. "Many require proof of purchase or valuation certificates for items above pounds 1,000 or so. You may need separate cover for more valuable items such as jewellery and antiques."

Check whether your policy offers "new for old" cover, or makes deductions for wear and tear. Also consider all-risks cover, to protect valuables outside the home, including on holiday. If you do this, you can save money by excluding personal possessions cover from your travel insurance.

Check you have the right security locks. Cilla Black had a pounds 1 million burglary claim rejected because she failed to install locks on her downstairs windows, where burglars broke in. Sharon Osbourne suffered a similar fate last year. Installing an approved burglar alarm or secure locks should cut down your premiums.

Consider paying premium annually rather than monthly. "Some insurers charge up to 30 per cent APR to pay monthly, costing you an extra pounds 20 a year," says Richard Mason, director of the price-comparison website www.Insuresupermarket.com. Also check how much excess you will pay on any claim.

Where possible, seek prior approval before paying for any work and keep all receipts for work done. Take photos of the damage before work starts and keep any damaged or destroyed goods for your insurer to inspect. Get a couple of estimates from different builders - your insurer can usually recommend approved tradespeople.

If your property has previously suffered flood or subsidence, you might struggle to get cover elsewhere. Insurers have a "gentleman's agreement" to continue covering existing customers whose homes are in flood- or subsidence- prone areas, or have made previous claims - which is better than not getting any cover at all.

If you are unhappy with the way your insurance company has handled your claim, first complain directly to them. If still unhappy, take your grievance to the Financial Ombudsman Service (0845 080 1800, www.financial-ombudsman.org.uk).

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