Why you could be bankrupted if you don’t have insurance

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There are plenty of people who don’t realise that without any home insurance, or if they have the wrong type of cover, they could quite possibly end up bankrupting themselves. Flooding in the home

Insurance can financially protect a home owner in variety of ways; from smaller unforeseen events such as a carpet being ruined by a water leak, to major incidents such as a house fire or a serious burglary.

In the worst circumstances, a home’s structure could be completely destroyed and its contents ruined.

Here are several practical examples of how, if the worst were unfortunately to happen, a homeowner, or in fact those who rent, could end up with their finances ruined and years of financial pain.

  • A house fire while builders are doing building work on your home

Statistics show there are around 40,000 to 50,000 fires in the home each year in the UK.

If you have work done on your house, but don’t tell your insurer, you could be in trouble. Your policy might not cover you for building work and wrongly fused wires, or a misplaced cigarette from a builder could start a fire which may result in your home being destroyed. In this scenario, your insurer wouldn’t pay out a penny.

If you had mortgage, let’s say for £200,000, the bank would still hold you responsible for paying it, even if the home against which the mortgage is lent doesn’t actually exist anymore.

If you were lucky enough not to have a mortgage, you’d be left with just the value of the land the house stood on and have to start all over again.

  • Home stripped by burglars

Whether you rent, or own your own home, there’s always a chance burglars might target your property and one day you’ll come home to find it gutted from top to bottom

It’s not uncommon for professional burglary teams to turn up at a home, break in and load up a van, with the neighbours assuming someone’s moving, or there’s a rational reason why a home is being emptied.

Various insurers estimate the average home’s contents to be worth anywhere between £30,000 and £55,000, once all fixtures and fittings, from sofas, curtains, carpets and white goods to clothes, electrical items, jewellery and other items have been taken into account.

As most people only have savings of a few thousand pounds, they’d be left hugely out of pocket and possibly with very few possessions. And as with a mortgage, if you’ve bought anything on a repayment scheme, you’re still going to have to pay the money you owe back.

  • Serious flooding

Some of the cheaper house insurance policies might not cover you for flooding, or at least only offer limited coverage, whether you’re a home owner or a tenant.

Insurers say that the average claim for flood damage is between £20,000 and £40,000, so we’re talking about serious sums of money.

So if the sort of flooding which affected thousands of homes in the UK  earlier in 2014 affected your home, but you only had limited (if any) cover, you could end up wishing you’d bought a better, more comprehensive policy.

Flooding can not only ruin a home’s contents, it can also impact on a property’s structure by damaging the foundations, brickwork and floors, any timber used in its construction, and outbuildings; potentially causing tens, if not hundreds of thousands of pounds worth of damage. In the worst case scenario, a home might need to be condemned and pulled down.

Even if you only rent your home, with your landlord being responsible for the structure of the building, the contents which you’ve carefully built up over the years could be destroyed, leaving your thousands out of pocket.

Check your Cover Levels and Contact Your Provider

In all three of the above scenarios, you can see the importance of firstly ensuring you have definitely bought cover, secondly checking that a policy is sufficient and thirdly considering what exclusions it has.

It also highlights the need for good communication with your insurer if the circumstances surrounding your home and what’s happening with it change.

Policy Expert

We’re here to help our customers to compare products and find a policy that’s right for them. Customer care is at the heart of everything we do and we have a dedicated customer service team on hand by phone, email, twitter and instant chat. For more information speak to one of our experts on 0203 014 9300 or email ask@policyexpert.co.uk

The views expressed here are solely those of the author and do not necessarily reflect the views of Policy Expert.