With the ‘cost-of-living’ crisis set to continue, insurance checks should be a priority, an expert has warned.

Jonathan Lloyd, of insurance broker Lycetts, looks at six key insurance considerations for the year ahead.

Be careful about contract works

The ‘improve not move’ trend, triggered by an unfavourable housing market, means homeowners need to be aware of the risks of building works invalidating policies, leaving homes potentially uninsured.

It is not always the case that a contractor’s liability insurance would be sufficient if anything goes wrong.

Property owners need to consider who is covering the property during the works, who is arranging cover on the works themselves and any associated liabilities.

It is essential that buildings insurance is reviewed, and updated where required, to ensure appropriate cover is in place.

A contract works insurance policy can provide protection for the property owner, and their contractor, the property for the duration of the works, work in progress, building materials, hired-in plant equipment, liabilities, third parties and optional non-negligence cover.

It is also worth examining any building insurance policies you may have, in conjunction with your insurer. The supply shortage and soaring cost of building materials caused by a combination of the pandemic, the conflict in the Ukraine and inflation, may mean that repair and rebuild costs exceed expectations. This should be reflected in the policy.

Cyber risks

Cyber-related fraud has increased by eight per cent in the year ending March 2020, and computer misuse increased by 89 per cent in the same period, driven by a large increase in hacking offences1.

People will invariably take precautions, such as installing security cameras or alarms, to lower their risk of being victims of burglary and other traditional crimes. However, when it comes to cybercrime, security is often an afterthought, or not one at all.

As more and more opportunities for cyber criminals and fraudsters emerge, care should be taken to keep personal information tightly guarded, to be on the lookout out for phishing tactics, to keep anti-virus software up-to-date and to consider cyber security insurance.

Underestimating underinsurance

Tempting though it may seem, cutting corners on home insurance, is not advisable.

Economising on vital cover can result in a heavy financial burden.

In a time of high inflation, it is essential to check contents policies. Items, especially watches and jewellery, may have increased in value since purchase, and the sums they are insured for may no longer reflect their true value.

For this reason, regular revaluation is advisable.

If the single item price limits set by insurers – the highest price they will pay out for individual items – is exceeded, then you should have them listed individually on your policy and insured to their full value.

Those who choose to let contents insurance lapse entirely could find their risk profile adversely affected in the long-term. Homeowners may be deemed financially irresponsible when attempting to start a new insurance policy at a future date, which could mean higher premiums.

Car caution

The idea that new cars begin depreciating in value the minute they leave the forecourt is now not necessarily accurate. Due to a global shortage of new vehicles, the market value of used cars is often higher than the invoice paid when they were new.

With an 18 per cent rise in car theft for the 12-month period ending in November 2022, the importance of ensuring your vehicle is accurately valued for insurance purposes becomes even greater.

Keep out of the red when going green

Environmentally conscious homeowners may be looking to make longer-term savings by investing in heat pumps, solar thermals or biomass boilers.

Here, it is essential to inform your insurance company of your plans. Renewable technology can cost thousands to purchase and install, so it needs to be included in the sums insured. You need to know that your insurers will pay for any renewable technology that has been destroyed in, for example, a house fire.

Review, review, review

The importance of reviewing your policies on a regular basis in the current climate cannot be understated. Do not forget that it is you, the policy holder, who is responsible for ensuring sums insured are adequate.

All too often, attempts to make short-term savings will result in long-term financial loss. If in any doubt, contact your insurance broker.