OT: House insurance rip-off: their latest scam?

[alan]

If you could see the original standard of workmanship on my 110 year house craftmanship and pride must have been towards the bottom of the list.

[SteveW]

I don't know about house insurance, but I do have a kit-car and my last insurance premium was £105. Of that £35 went to the insurers and the rest was the brokers fees!

SteveW

[Kevin]

If you were the mortgageee, wouldn't you want the house to be insured against all risks? The alternative is that the bank or building society (or rather its other members) would effectively be insuring houses against flooding, since they'd carry the otherwise-uninsured loss when the householder surveys his flood damage and chucks the keys in.

[harry]

They are threatening to put a levy on ALL insured people to cover flood risks. So you'll pay for floods whether you like it or not. Even if your house is not at risk.

[harry]

Victorian houses for the working classes are total rubbish. There are still plenty around. Thrown up.

[Huge]

So next year approach the insurer direct.

[Mike Barnes]

Fair point, for those with mortgages. While I think the just-walk-away scenario is somewhat unlikely, the mortgagee's attitude isn't.

[Tim Streater]

What do you mean by "the householder ... chucks the keys in"?

[Hugh - in either England or Sp]

Subsidence cover used to be virtually unavailable until the building societies insisted on it being included.

[Peter Johnson]

willing to insure to the correct rebuild value only, or are they all now trying to screw us over with this new scam?? It's not a new thing at all. My policy has been renewed on that basis for years. It stops people underestimating the cost to reduce the premium. (Not everyone understands its purpose. I used to work with a woman who would have an estate agent value her house every three years or so and insure her house for that amount.)

[Hugh - in either England or Sp]

willing to insure to the correct rebuild value only, or are they all now trying to screw us over with this new scam??

Exactly. An estate agent may have some idea what a house would fetch but this could be a long way over or under the amount for which the buildings should be insured.

[Kevin]

Someone owns a house that he paid 200,000gbp for, and still has 175,000 outstanding on his mortgage. He hasn't got it insured against flooding. It floods, and would cost 40,000 to repair. He doesn't have 40k in the bank, and no-one will lend it him without security.

What are his choices? He can't live in the house as it is, so he's paying out hotel bills then rent. He could try to sell it for, say £150k, given that its value will be depressed by a) standing empty and semi-derelict and b) the fact that canny buyers may realise that it's in a flood risk area. And he'll have to persuade the mortgagee to let him, as he still owes more than that.

Or he could just chuck the keys over the counter at the building society and walk away. Solves nothing for him, in one sense, but many folks do run off into bankruptcy, and seem to emerge hardly scathed after a few years.

I'm not advocating this - I dislike fecklessness of any sort - but I can see that it could happen, in the same way that separating couples do exactly the same thing. I wonder how many repossessions really are against the wishes of the parties, as against an "easy" way out, that has the bonus of bringing down someone you've grown to dislike.

Meanwhile, the mortgagee is landed with a property that they've got to sell, probably at auction and probably very cheaply, knowing that they'll have to whistle for the rest of the money they'd loaned. Whether it happens once, or so frequently that they hypothecate part of everyone's interest payments to a fund to cover this (i.e. insurance), we, other borrowers and savers, bear the cost.

[Andy Burns]

The lender can go after the difference from the original borrower for (IIRC) up to 7 years if he subsequently money ...

[djc]

True. But maybe it would make it just that bit easier for everyone to understand if, for ordinary properties at least, it was based on market value. Overall, the premiums and losses paid out could be the same, but the declared value would at least relate to something most people could estimate. The problem with cost to rebuild is that like 'rateble value' it is an contrived figure. The only way to be sure of the right value is to employ a surveyor at great expense; and the surveyor might be found to be wrong if ever there were a claim: but you paid a surveyor, and you hope he paid his professional indemnity insurance, so that's all right then ?or not.

[F]

Or use

[tim.....]

But this only works if they have the means to get the money

Most people won't be able to magic up a 50K shortfall, that's why they walked away in the first place

tim

[John Williamson]

Even the taxman has been known to give up on occasion.

[Andy Burns]

I hadn't touched a drop when I wrote that, honest!

True at the time, but they could always inherit a lump sum, then find the bank (or someone they've sold the debt on to) come knocking.

[Rick Hughes]

to steer you towards a "blanket" policy with an overall sum insured of 500,000 pounds, even if your house is worth less than half that!

recover enough from the insurer to put everything back in order. Sounds fair enough, I think. However, if you are OVER insured, you cannot claim the excess sum insured to rebuild your house to a better standard than it was originally, so you're basically just throwing valuable premium money down the drain for nothing! The fact that the insurer is pushing you towards over insuring no assistance to you in law in the event of a claim.

pay for 500,000 pounds worth of cover which I can never get the benefit of! A quarter of a million pounds worth of cover is simply wasted...

willing to insure to the correct rebuild value only, or are they all now trying to screw us over with this new scam??

Not sure if you have factored in ... Rebuild cost is always much higher than house value .... as it has to include demolition costs, hazardous materials (asbestos could be in build for example) Plus making safe services, temp accommodation during rebuild, etc.

When it comes down to it nobody is forcing you to put your cover with any particular company, and they are in business to make money for their share holders .........

If you don't like teh quote go elsewhere.

I was very surprised how much of a better deal got by putting house & contents with my Bank ... saved over 50% on renewals, plus gained a lot more cover ... personal possession, travel etc.

[F]

Are you sure? Conventional wisdom is that rebuilding cost is lower than house value as the cost of the land can be discounted when rebuilding.