Cheap home cover could be too basic: Contents policy has a sting in the tail

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NORWICH UNION has launched a house contents insurance policy that claims to cut premiums dramatically. The sting in the tail is that it provides 'back-to-basics' cover only - marketing jargon for a list of exclusions.

The policy, called Essentials, covers the basics - storm, theft and vandalism. Norwich Union says you no longer have to insure against often irrelevant risks - invasion by farmyard animals, oil spillage, or falling trees, all of which are covered by traditional policies.

However, the policy also excludes cover for freezer contents, contents in the open, subsidence, heave and landslip, and accidental damage other than to rented televisions or videos.

The policy does not provide new- for-old cover, which replaces a lost or damaged item with a new one. Essentials offers 'like with like' - a marketing term for indemnity-only cover. The policy insures possessions after deductions for wear and tear, although items of less than a year old with proof of age will be replaced as new.

Brian Richards, personal development manager at NU, says: 'By offering new-for-old and accidental damage cover the claims really mount up. Excluding these is really where you can start reducing premiums.'

The cost of Essentials cover is pounds 202 a year for a one-bedroom home in London W10. NU compares this with an average figure of pounds 409 (a composite figure of typical rates from six insurance companies.)

However, while Essentials offers indemnity-only cover, the other policies are new-for-old. And average figures can invariably be bettered if you seek several quotes.

You also need to check the level of cover. Essentials provides a limit of pounds 10,000 for one or two-bedroom homes and pounds 12,500 for three bedrooms. Some contents policies provide pounds 30,000 cover as standard.

A one-bedroom property in Birmingham B20 will cost pounds 169.70 with Essentials and pounds 294.40 on average. Through AA Homequote a 40-year- old would pay pounds 234 for pounds 30,000 new- for-old cover.

If you understand exactly what cover you are buying, Essentials may be worth considering.

The policy will be sold through brokers. It will be up to them to ensure that people really understand the policy's limitations.

Philip Cartwright, a spokesman for the broker Chase de Vere, says: 'Many people may now be paying for cover that they do not really need. If they are absolutely sure that their contents are of minimal value and price is the ultimate criterion then the policy may be worth looking at.

'But pounds 10,000 is not a lot of cover in this day and age. In terms of comparison, Commercial Union is not that much more expensive and it has better cover. For marks out of 10, I would give the Essentials policy four.'

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