Don't let bad home insurance ruin the festivities

Jewellery, computers and sports equipment won't always be fully covered, writes Laura Slattery.

Coloured lights, candles and a sackful of festively wrapped presents can help disguise the bleakness of winter, but when crime and cold weather intrude on our seasonal hibernation, an adequate home insurance policy could be the most effective way to prevent much of the misery.

The average household will spend around €1,270 on Christmas gifts this December, according to a survey by accountancy firm Deloitte. Homeowners will store these luxury goods in their home, not once considering whether or not they would be covered in the event of a burglary.

Most home insurance companies will automatically bump up the amount of contents cover in their policies by 10 per cent during the month of December, recognising that organised shoppers tend to have valuables stashed behind the couch just around the time of year when darkness makes breaking and entering somewhat easier.

But homeowners often don't realise that, even with this extra cover, high value items like jewellery, computers and sports equipment won't always be fully covered. And if policyholders haven't taken the proper security precautions, they won't be covered at all.

The premium discounts on offer should spur people to bump up the security on their home.

People who have a burglar alarm installed pay at least 5 per cent less in home insurance premiums than those without, while an alarm connected to a monitoring station and approved by the National Standards Authority of Ireland can swing a discount of up to 20 per cent.

Being part of a Neighbourhood Watch scheme also goes down well with some insurers.

Sometimes, however, it's the little things that catch us out. Former Blind Date presenter Cilla Black has learnt the hard way that insurers tend to be a little picky when it comes to things like locks.

Last winter, her insurance company rejected her claim for compensation following the theft of over £1 million (€1.45 million) worth of jewellery from her home. The claim was dismissed because no locks had been fitted on the downstairs windows, breaching the policy conditions.

So digging out a copy of that home insurance policy and checking exactly what it says about required security conditions could save thousands of euro worth of disappointment in the event of a claim.

And while you are sifting through the small print, it could also be worth your while to examine what, if any, cover exists for that pricey new engagement ring you were planning to hand over or hoping to receive this Christmas.

Home insurance is essentially made up of two components. Firstly, buildings insurance covers the building plus garden sheds, gates, fences and permanent interior fittings against hazards like fire, flood and subsidence.

Then there's contents insurance, which covers everything inside the four walls - or almost everything.

Most home contents policies contain a single item limit. For example, Quinn Direct policies cover single items up to a value of just €1,905 - a piece of jewellery or any other item exceeding this amount should be specifically named on the policy. An independent valuation may be required.

Items like jewellery, cameras and electronic goods can also be insured when removed from the house, usually for up to 60 days, under the "all risks" section of the policy. "All risks", however, is an optional extra under most policies, costing policyholders €1.20-€2 per €100 insured.

So an engagement ring worth €4,000 will add at least €48 annually to a home insurance policy if it is listed as a specified "all risk".

Accidental damage is not automatically included in most policies, so, again, homeowners will usually have to pay extra if they want this cover. Sadly for the clumsy amongst us, crystal and china items cannot be covered for accidental damage.

Claims for the theft of sports equipment, bicycles or one of this year's more expensive in-gifts for kids - a trampoline - could be refused if they are taken from an outbuilding such as a garden shed that did not have sufficiently impressive padlocks attached.

Insurers often impose rather low limits - around €400 - on the cover they provide for garden items, while cover for bikes is an optional extra under certain policies.

Some insurers cover home office equipment up to quite generous limits. For example, Allianz policies will insure computer equipment up to a value of €3,810. However, it could still be worth checking exactly what cover your policy includes - replacing a desktop computer plus colour printer, scanner, webcam and your brand new ergonomic wireless keyboard could all add up.

There is one other policy term that might, in rare cases, prove useful at this time of year. Insurers such as AXA, Hibernian and Eagle Star automatically cover the contents of your freezer up to a certain value, which could be some solace if an extended power cut means your 20lb turkey prematurely defrosts, ruining Christmas dinner.

But no amount of policy gimmicks will help rescue the festive season if a frozen pipe bursts, unleashing water damage on your wooden floors, dry-lined walls and kitchen fittings, and it turns out that you are woefully underinsured.

Buildings insurance should be based on the full cost of rebuilding the house, an altogether different figure than its market value. However, inflation in the cost of building materials and labour means that hundreds of thousands of homeowners currently hold insurance policies that are based on out-of-date rebuilding costs. This leaves them exposed to extensive construction and replacement bills in the event of a claim.

Underinsuring won't just lead to a shortfall in the event of near total destruction of the property. Some home insurance policies contain what is known as the "average clause", which works by restricting the size of any payout to the proportion of the rebuilding costs that is actually covered.

Royal & Sun Alliance, AIB and FBD all include the average clause in their home insurance policies, while Hibernian Insurance applies it in some circumstances.

Making sure policies are index-linked can help avoid underinsuring, but it won't solve all payment shortfalls.

Insurance companies can refuse to pay out on the basis that the pipe burst as a result of neglect. Similarly, if dodgy electrics are to blame for Christmas tree lights setting fire to the living room, don't expect your story to garner much sympathy. Insurers may also make a deduction for wear and tear when calculating the value of any carpets or clothing that need to be replaced.

Finally, if floods or burst pipes add a certain sogginess to proceedings this Christmas, a more immediate concern might be whether or not the insurance company operates a 24-hour emergency assistance number.

A helpline that doesn't shut down when everything else does could be the key to getting your celebrations back on track, even if you are left out of pocket afterwards.