How do I Insure My Shared Ownership Property?
Essentially there are two types of insurance suitable for Shared Ownership properties; building insurance, and contents insurance. The first one is usually the responsibility of the freeholder of the property - that usually would be the housing association you bought the property from. The latter one you should take out yourself.
Apart from these there are other types of insurance that will protect your and your family's ability to continue paying your mortgage and stay in your property. These are various types of life insurance, critical illness insurance, and income protection insurance.
Building insurance covers damage to the structure of your home such as the walls, roof and floors. It will cover the cost of repairing or rebuilding your home if it becomes damaged in the future.
What damage is covered by building insurance?
Building insurance will cover all the damage to the external and internal fabric of the building. An example would be damage to the ceiling, walls, and floor as a result of a water leak from the flat above.
Is my balcony, patio and shed also covered by building insurance?
Building insurance will cover everything that is within the 'demise' of your property. The extent of your demise is specified in your leasehold agreement. If the demise of you home includes things like sheds, your patio or balcony, they will be covered by the building insurance. If they are not, it means that you don't own them - they will still be insured by the freeholder of the development but you will not be the one to claim.
Who is responsible for the roof?
If you are a Shared Owner living in a flat, the responsibility for the roof of the building lies with the freeholder (in most cases Family Mosaic). We will have insured the roof so if there is damage to the roof (say, due to extreme weather) we will see to it that it's repaired. The costs of the repair will be covered by our building insurance.
If everything is insured, why do I still have to pay if something gets damaged?
Every insurance product has a component to it called 'excess'. Excess is the amount of money you are willing to cover yourself in the event of making a claim. Say there was a leak from the apartment upstairs. The damage to your ceiling, walls and floor is £700. If your excess is £100, then that means that when you make a claim, you agree to pay £100 towards the repairs with your insurer covering the remaining £600.
Damage to your property
If the damage has been done to the fabric of the building that is within the demise of your home, it is up to you to contact the provider of the building insurance and make a claim. You will also have to pay the agreed excess. The exact amount of excess that you will need to pay is stated in your Leaseholder's Handbook but in the case of Family Mosaic's leaseholders this tends to be £100.
Damage to the development
If the damage to the development is outside of the leaseholder's demise (the roof is a good example), the freeholder (usually Family Mosaic) will put in the claim to the insurer. The external parts of the walls, the roof and other areas of that nature tend to be insured under a different policy which would carry a much higher excess (say £15,000). When damage to these areas is reported, the excess is not re-charged to the leaseholders proportionally (say £5,000 each if there are three families living in the building). The excess they are charged will not exceed the agreed sum of up to £100, which is then divided by the number of flats within the block (if your block has ten apartment you will pay only £10). The difference in cost will be covered by Family Mosaic.
What is 'rebuild value'?
In simplest terms, 'rebuild value' is the amount of money it would cost to rebuild the property from scratch. However, if you wanted to know the rebuild value of your own flat or development, you wouldn't be able to find that out as we insure on the total rebuild value of all of our leasehold flats in bulk.
All of our leasehold properties have been insured to the total rebuild value of around two billion pounds, and this amount is then index-linked and increased every year by about 5% to account for inflation. You can rest assured that all of our homes have ample coverage should anything bad was to happen.
How do I contribute to building insurance?
Contributions to the building insurance of your property and the development where you live are included in your monthly service charge.
The repair needs to be covered by building insurance - what do I do?
If the damage is within your property (or within your 'demise' as specified in your lease), you will need to contact your insurer yourself. You will also have to pay the agreed excess.
If the damage occurs outside your property (but within your development), you should contact your freeholder (usually Family Mosaic) and report it to them so that they can get in touch with the insurer. The freeholder will pay the agreed excess and you will be asked to contribute the to level of excess agreed in your policy (see Leaseholder's Handbook for details).
Family Mosaic has no legal obligation to insure our tenants' or leaseholders' contents - it is the sole responsibility of the resident to insure their contents against any loss.
What is contents insurance?
Contents insurance covers loss or damage to everything in your home which is not part of the structure or the building, so you can replace or repair them without having to spend a fortune.
Why is it important to take out contents insurance?
It is important to take out insurance to cover the contents of your property from theft or damage so that you are not exposed to any financial difficulties should an unfortunate incident occur. In an example given above, if there is a water leak from the apartment above, the damage to your ceiling, walls and floor would be covered by the building insurance. Any damage to your carpets, furniture, equipment or clothes would not be covered. If you want to recoup these losses, you need to have contents insurance in place.
What does contents insurance cover?
Money Advice Service website has a very handy table listing everything a good policy should have.
In general, a contents insurance policy can include:
•all contents including furniture, fittings, clothes, and equipment,
•valuables such as jewellery, watches (gold or silver), works of art, cameras, TVs, computers, etc.,
•money in the home (excluding credit cards - these need to be insured separately)
•outdoor items (like garden furniture),
•personal liability (if you cause accidental injury to someone or loss or damage to their property).
These are the features any good insurance policy should have. Additionally, you may opt for add-ons such as: accidental damage cover (see below), loss of water, insurance of personal possessions whilst outside of your home. plants in your garden, the cost of replacing locks and keys if they get lost or stolen, and many more. You can even choose to increase your insurance over certain special days - like Christmas - when you have more valuable items in your home than usually.
What are the types of contents insurance?
There are two types of contents insurance: standard cover and accidental cover. Standard cover will cover only the main risks such as: flood, fire, burglary, vandalism, and the like. Accidental cover will protect you against any accidental damage; it's a much wider policy. For example, your toddler tipped over a flower vase and the water damaged the TV set. Standard cover would not pay out in this situation but accidental cover would.
Things to look out for when buying contents insurance
Am I suitably insured?
When purchasing your insurance cover, it is easy to undervalue your possessions. Have a long look at the contents of you wardrobe, you shoe cabinet, your kitchen, your living room - how much would it really cost if you had to replace everything in one go, should - God forbid - your home caught fire?
There are calculators available online that will help you accurately calculate the value of your contents for insurance purposes:
Is it 'new for old'?
Many of us automatically assume that should anything happen to the contents of your home, your insurer will cover the cost of replacing them on the 'new for old' basis, which means that even if your suit was ten years old, the insurance will pay for you to buy a new suit to replace the old one.
This is a dangerous assumption to make as it is not always the case. Depending on what the item is, you may only be offered the cost of repairing the damage, or your policy might only cover losses due to wear and tear. This means that, while you will receive a pay-out to replace or repair the damaged items, a reduction will be made for the effect of wear and tear and to take account of the fact that the item itself might have depreciated in value.
Since different insurers have different rules, it is very important to check the small print in your policy to find out exactly how your items will be replaced.
Watch out for the 'single article limit' clause
This specifies the amount of money paid per each item in your household. For example; you might have insured the contents of your home to the value of £20,000. You then have a break-in and an item of jewellery is stolen that is worth £8,000. You may think that you are covered, but you then find out that a 'single article limit' on your policy is only £1,500. This means that even though your cover seemed sufficient, you will only get £1,500 (minus your excess) for the item that was stolen.
If you have particularly valuable items in your home, it makes sense to either adjust the single article limit or consider taking out a separate insurance on these items.
How much excess should I pay?
As we have explained above, your excess is the amount you agree to pay yourself when making a claim. If your insurable loss is £500 and your excess is £100, you will have to pay £100 before you get £400 from the insurer.
What is the difference between compulsory and voluntary excess?
Compulsory excess is the minimum excess the policy demands you to pay. You will not be able to take out an insurance policy without agreeing to an excess.
You may choose to pay a higher excess (voluntary excess) in the event of a claim, in exchange for lower premiums (the monthly amount you have to pay to the insurer).
You should be careful when opting for a high voluntary excess as it may prove false economy. Say, you claim is for £500. You agreed to pay voluntary excess of £350 on top of the compulsory excess of £100 - bringing your total excess up to £450. If this is the case, if your claim is successful, you will only get £50 - seems hardly worth the hassle.
Contents Insurance for Family Mosaic residents
Family Mosaic supports the My Home Contents Insurance Scheme arranged by the National Housing Federation.
This is a discounted product and can be purchased for as little as £3-£10 per month depending on the value of your contents. You need to make sure that the level of the cover is adequate to your needs.
Telephone: 0345 450 7288
Note: if you home contents are worth more than £35,000, you may be better off using a comparison website such as Confused.com or MoneySupermarket.
Other types of insurance
There is a number of insurance policies out there that will make sure that your family doesn't end up homeless if tragedy strikes.
There are several types of life insurance. Some of them can be used to ensure that your mortgage is paid even if you (or other breadwinner in the family) passes away before the mortgage is paid.
Level-term life insurance policy
With this policy, the amount you are insured for stays the same over the course of the policy. If you die during the time specified in the policy a certain, agreed, lump sum will be paid to the named person(s). This is a good option when you have an interest-only mortgage because the lump sum would then repay the mortgage on your death.
Decreasing-term life insurance policy
Here, the amount you are insured for decreases with time. It is suitable for people with a regular mortgage where the amount to repay diminishes over time. Premiums are usually significantly cheaper than for level-term cover as the amount insured reduces as time goes on.
Critical illness insurance
This type of insurance is worth looking at since, according to The Guardian, you are six times more likely to claim under critical illness than life insurance.
Critical illness insurance pays out a lump sum if you've been diagnosed with a certain type of illness listed in the policy. This amount can then be used to pay off your mortgage, pay for medical treatment and necessary care, or allow you to go part-time or completely quit work for the time you are unwell.
The crucial thing to remember about this type of insurance is that it only pays out if you are diagnosed with the illness specified in the policy, not each time you are diagnosed with serious, life-threatening, or terminal disease. So it pays to go for the most comprehensive policy with a provider who has a good track record of paying out on these type of policies.
Also, as the two of the most common reasons claims are declined are that they don't meet the definitions covered by the policy and/or that the policyholder didn't tell the insurer about a previous medical problem, it is very important that you disclose every medical condition - even if it seems trivial or happened a long time ago.
As with all insurance products - but life and critical illness insurance in particular - it is always worth to speak to a professional adviser before making a decision.
Income protection insurance
Income protection insurance (sometimes known as permanent health insurance) is a long-term insurance policy designed to help you if you can’t work because you’re ill or injured.
It ensures you continue to receive a regular income until you retire or are able to return to work. You can dip in and out of it for the duration of the policy (if you come back into work and then fall ill again) and unlike critical illness insurance it covers you in the event of any long-term illness preventing your from working.
You can find out more about income protection insurance from the Money Advice Service website.
Short-term income protection insurance
Short-term income protection, also known as STIP, will pay out in the event of you not being able to work due to illness, accident or loss of work (redundancy). The support is there only for a short period of time (usually 12 months).
The policy excludes self-inflicted injuries, and some illnesses (check your policy for specifics), as well as voluntary redundancy, some types of dismissal, voluntary retirement, and redundancy that was announced before the policy was taken out.