Sam Dunn: 'Do I really need contents insurance?'

House Doctor
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The Independent Online

Question: My husband has "saved cash" in the recession by not bothering to renew our home contents insurance, though he has renewed our buildings cover. He says that £600 is unnecessary as we've little of value in a top-floor flat in a nice area of Cardiff. Should I worry? DL, Cardiff.



Answer: Undoubtedly. First, it's not just about theft – what about a fire? "You live in a block of flats where your neighbours' errant behaviour will be completely out of your control," says Asia Manzoor, spokeswoman for insurance company esure.

Second, it may be that nothing special jumps out at you in your flat, but the value of all your goods including the kitchen's white goods and replacing your clothes can easily add up to a large sum.

Insurers MORE TH>N estimates that 28-year olds have an average of £33,166 worth of personal possessions in their homes.

And £600 cover for a flat? That sounds very steep for home contents. Try three price comparison sites to hammer down the cost, and do it today. This is one false economy you can do without.

Question: My boyfriend and I are moving into his flat and have decided to rent out my house that I own after failing to sell it. Do I have to tell my lender Nationwide that the nature of the loan has changed, i.e. that I've become an 'reluctant' buy-to-let investor, or can I just carry on with my residential loan? Carole V, Leics

Answer: You might believe, to twist an old idiom, that 'what they don't know won't hurt you'. Yet keeping schtum about your plans to install tenants could end up doing serious damage to your finances.

"Initially this may seem like a moral dilemma, after all, if the mortgage is being paid on time each month, do they really need to know?", says Andrew Montlake of mortgage broker Coreco.

But in reality, he warns, failure to 'fess up will likely leave you in breach of both your mortgage and your home insurance.

If it all goes awry – flaky tenants' failure to pay rent on time triggering a mortgage default, say, or a contested claim on your contents cover alerting insurers – you could end up facing the financial music.

"The lender will not be impressed if it finds out you've left and installed tenants and could, in theory, rescind its mortgage if you are found to be in breach of the conditions of the loan," warns Mark Harris of Savills Private Finance.

Being upfront and telling your lender will remove these risks, and might not end up costing you more.

"Lenders often taken an enlightened view when a borrower wishes to let their former home; each request will be assessed on its own merits," says Richard Morea of London & Country.

Lenders can often impose a time limit such as three years, after which if you wish to continue letting the flat, you may have to remortgage to a buy to let scheme, either with Nationwide or another lender. You should also check the conditions of any buildings and contents policies to ensure that the cover remains valid once the property is let.

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