Most common ways that home insurance doesn't pay out: how to protect yourself

If your provider has ever rejected your home insurance claim, then it might have been due to one of five common reasons.

Home insurance is one of the five insurance policies that you need to have. Both buildings insurance and home contents insurance are common policies that can protect homeowners when disaster strikes – whether that be from freak weather, vandalism, or burglaries.

But despite the importance of home insurance, many households buy it once and then do not give it any further thought, relying on cover that may not actually help them in a real crisis.

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This could be for a number of reasons, such as forgetting to update your details, falling foul of auto-renew, or scrimping out and getting the cheapest policy possible.

“People assume that if they’ve got a policy and they’ve paid their premiums, they’re covered,” says Craig Morgan, insurance expert at SJL Insurance Services.

But in reality, Morgan explains, insurance is full of terms and conditions, “and it’s often the small print that makes the biggest difference.

“There are cases where claims are reduced or rejected simply because the cover doesn’t match the property’s current rebuild cost, or because key details were never updated.

“The cover might have made sense five years ago, but life changes and insurance needs to keep up. Otherwise, it won’t be there when you need it most,” he concludes.

We look at the five most common home insurance mistakes that could cost you in a crisis, and how you can make sure you don’t get caught out.

The five most common reasons insurance doesn’t pay out – and how to avoid them

Letting policies auto-renew

When most people take out an insurance policy, it will typically be for a specified term, such as one year.

Once it comes to the end of your term, though, many policies will renew automatically, meaning that you aren’t able to adjust the details of your policy – this can cause problems if your circumstances change.

You don't necessarily have to have moved house for significant changes to have occurred which could be relevant to your home insurance.

Morgan explains that a lot can change in 12 months, ranging from home improvements to having new possessions, so letting your policy roll over without checking the details can leave you unknowingly exposed.

You could also be missing out on better deals on your home insurance if you don't regularly review your policy and reassess its place in the market.

We look at how to cut the cost of your home insurance in another article.

Being under-insured

A common mistake for people taking out home insurance is being inadvertently under-insured.

This can happen for a number of reasons, but the most common is that the policyholder got insured on their home years ago and has forgotten to update details about their abode.

Morgan urges policyholders to remember that getting an insurance payout is “not about what you paid for your home or contents, it’s what it would cost to replace everything today.”

In the event that you have to get your insurance policy to pay out, if you have not made sure that you are properly covered, your insurance provider may only pay out a portion of your claim.

Inflation, supply shortages, and rising construction costs have also meant that replacement values have soared, so being underinsured could mean you get much less than you expected even if your home insurer does pay out.

Forgetting to declare changes

When you take out an insurance policy, insurers base your premium on the information you provide at the time that you took out the policy.

As time goes by, though, you may want to make some changes in your home. For example, you may take in a lodger, convert your loft, or start a business from home.

Morgan explains that “from renting out a room to upgrading your kitchen, anything that affects the value or use of your home should be declared.”

This is because any out-of-date information has the potential to invalidate your claim entirely, so it is vital that you are diligent about keeping your details up-to-date with your insurance provider.

Missing extras

Your insurance policy may not include cover for extra things that go beyond core buildings insurance or contents insurance.

If this is the case for you and you have not noticed it, you could be caught out and not receive an insurance payout.

“Just because it’s important to you doesn’t mean it’s automatically included,” says Morgan, urging policyholders to ask providers what is and is not included.

Some common extras that are not included in some home insurance policies include: accidental damage, mobile phones, bicycles and flooding, among others.

Focussing only on price

With household budgets continuing to be stretched, it can be easy to take out a cheaper home insurance policy, especially when there are many more pressing things that this money could be used for.

However, taking out the cheapest policy available could come back to bite you in a time of crisis.

Though these policies have the merit of being inexpensive, they often come at the cost of scrimping on important protections that may have been removed or reduced.