Understanding Key Property Insurance Terms: A Guide from Property Claim Assist

At Property Claim Assist, we understand that property insurance can sometimes feel overwhelming, especially when faced with industry-specific jargon. Recent research from Go.Compare revealed that a significant percentage of homeowners do not fully understand key property insurance terms. For example, only 52% of people fully understand what “accidental damage” means, and just 33% know what “sum insured” refers to. This lack of knowledge can lead to underinsurance, unexpected costs, and difficulties when making a claim. To help, we’ve compiled a guide to the most commonly misunderstood property insurance terms and their importance.

Accidental damage refers to unexpected, sudden events that cause damage to your property or possessions. This could include spilling red wine on a carpet or a child accidentally knocking over a TV. According to the Go.Compare research, nearly half of homeowners are unsure what this term means. Not all property insurance policies include accidental damage cover, so it’s important to check your policy details.

Buildings insurance covers the structure of your property, including walls, roof, and permanent fixtures like kitchens and bathrooms. It typically protects against risks such as fire, floods, storms, and subsidence. The research found that only 52% of people fully understand this term. If you own a property, having the right level of buildings insurance is crucial to avoid financial risks.

Contents insurance covers your belongings inside the property, such as furniture, electronics, and personal items. It protects against theft, fire, and other types of damage. Shockingly, only 52% of people fully understand this type of cover, despite its importance in protecting personal possessions.

If you have suffered damage to an item that forms part of a set or suite, this clause may apply. If the damaged item cannot be repaired or replaced, the insurer will pay for the entire set it belongs to. Without this cover, the insurer will only pay for the damaged part, irrespective of whether a match can be found.

In the case of Contents insurance, consider the example of a three-piece suite. However, the impact could be greater in respect of damage to your building, such as kitchen units, tiling, or matching floor coverings. These are all items that an insurer will consider as matching, and the absence of this cover could significantly impact your claim.

A no claims bonus (NCB) is a discount given by insurers if you haven’t made a claim in a certain period. The longer you go without making a claim, the bigger the discount you could receive on your premium when renewing your policy. Yet, 48% of people in the research admitted they do not fully understand this term.

Legal expenses cover provides financial assistance for legal costs associated with property-related disputes. This can include issues like boundary disputes, property damage claims, or disagreements with tradespeople over unsatisfactory work. Despite its potential value, only 40% of people fully understand this cover.

Compulsory excess is the fixed amount you must pay towards any insurance claim before your insurer covers the rest. For example, if your compulsory excess is £200 and your claim is £1,000, your insurer will pay £800. Surprisingly, only 40% of people fully understand this term.

Voluntary excess is an additional amount you choose to pay on top of the compulsory excess. Opting for a higher voluntary excess can lower your insurance premium, but it also means paying more out of pocket in the event of a claim. Like compulsory excess, only 40% of people fully understand this option.

Some policies include additional excesses for specific types of claims, such as flooding or subsidence. It’s important to check your policy details to understand what excesses apply to different scenarios. The research found that only 34% of homeowners fully grasp this term.

The sum insured is the maximum amount your insurer will pay out if you make a claim. For buildings insurance, this should reflect the cost of rebuilding your property, and it should also cater for demolition and professional fees. Many insurers will have an average or proportional remedy clause in the policy that could mean the value of your claim will be reduced to reflect any underinsurance. The reality here is that choices made when saving a few pounds when taking out a policy could end up costing you tens of thousands of pounds in the event of a claim.

Some insurers will request a declared value from you – this is similar to the sum insured and is most often requested when your policy otherwise provides either an unlimited or standard sum insured.

For contents insurance, the sum insured should be enough to replace all your possessions. Alarmingly, only 33% of people fully understand this crucial term, which can lead to underinsurance. Another common misconception is that carpets are considered part of your building when they are actually considered to be contents. Therefore, the sum insured needs to account for this too.

Be wary – while you may not believe that the second-hand value of your possessions is significant, most insurers will base their assessment of adequacy upon the value of replacing the item as new.

Being underinsured means that the sum insured amount in your policy is not enough to cover the full cost of replacing or repairing your property and belongings. If this happens, insurers may only pay out a proportion of your claim, leaving you responsible for the rest of the cost. Only 26% of people fully understand this term, highlighting the need for better awareness.

With so many homeowners unsure about these key property insurance terms, it’s vital to review your property insurance policy. To ensure you are fully protected:

At Property Claim Assist, we help policyholders navigate the claim process to ensure a fair settlement. If you need expert guidance on a property insurance claim, contact us today – our services can come at zero cost to the policyholder!