47% of first time buyers don’t budget for home insurance when stepping onto the property ladder, according to latest research from The Co-operative Insurance.
As a result, 28% of new homeowners who have bought their homes in the past five years don’t have any home insurance in place, leaving more than £1.5bn worth of property and contents currently at risk.
Of those who have taken out insurance, and did budget for it, 13% admitted to underestimating the cost of cover, with over one in ten believing that it would cost less than £100 a year to adequately protect their home and its belongings.
Despite first time buyers investing in their new home, common insurance mistakes highlighted included not having any contents insurance in place, with 41% of those questioned not taking out this type of cover. Of these, 29% said this was because they had run out of money, 10% said they were too busy to sort it out and 24% didn’t think they needed it.
Of those who did have contents cover, 19% didn’t arrange it before they moved all of their belongings in to the new property. And for those who did set aside an amount for home insurance as part of the property buying journey, the average budget allocated was £236.72 for an annual premium.
The Co-operative Insurance said its findings reveal a lack of understanding when it comes to the home buying process, 34% didn’t know that having buildings insurance in place when they exchanged contracts was a minimum requirement of a mortgage.
Despite a potential property-owner’s responsibility to have buildings insurance in place from the date of exchange, 17% admitted to buying their buildings insurance too late – at the time of contract completion.
53% of first time buyers have guessed information to obtain a home insurance quote, however 31% of these did not bother to find out the correct answers and update their quote before actually purchasing the policy. Men were more likely to go back and provide their insurer with accurate information once they had checked their details (45% vs 37% of women.)
In addition, when obtaining a buildings insurance quote, 25% estimated the rebuild cost of their home to be the same as the purchase price, as opposed to speaking to their insurer for advice or using a rebuild calculation tool to gain a more accurate picture of the cost implications, should something happen to their property.
Caroline Hunter, head of home insurance at The Co-operative Insurance, said: “The research highlights not only a widespread confusion among first time buyers of all ages when it comes to assessing the type of home insurance they require for their property, but it also demonstrates that too many individuals have an inadequate level of cover or are leaving themselves exposed by purchasing insurance too late in the buying process, or worse, not at all.
“As many first-time buyers are likely to have previously rented a property, their landlord will have taken care of their buildings insurance and therefore, they may not be aware of their responsibility to have this in place when becoming a home-owner.
“While buying a house is a stressful time, we would urge people not to overlook their buildings and contents insurance and to make sure they provide the right detail when obtaining a quote, as not doing this can invalidate a policy.”