Household insurance is a common type of policy, but it has many facets. Fiona Andrews explains the fine detail of cover that can be provided

Household insurance, like motor insurance, is a very common product. However the diversity of the cover provided under a household policy should not be underestimated. Those who transact this class of business need to be fully aware of the scope of available cover and, importantly, its application. It is essential that the advice given to policyholders is sound and appropriate and that they buy products which meet their requirements and satisfy their expectations.Household insurance comes in two categories: buildings cover and contents cover. In broad terms, the former protects the structure of the property, while the latter covers the policyholder's belongings.Within each type of policy there are many variations and possible extensions. There may also be overlap with other personal insurances, such as travel cover. The two types of policy may be purchased together from one insurer; indeed, some firms offer a discount on the premium if a combined purchase is made.Policies may also be bought separately; for some purchasers (such as those living in rented accommodation), buildings cover may not be necessary.Those wishing to succeed in the household insurances market should be familiar with the following key areas:

Scope of coverKnowledge is required of the core cover provided. This includes:

  • Policy wordings
  • Exclusions and extensions relating to: buildings; contents; all-risks/personal possessions; caravans; travel; livestock and pets; personal liability (including owners' liability).
    • Likewise, individuals must understand the following in the context of household insurance policies:
  • Money and credit cards
  • Legal expenses
  • Pedal cycles
  • Assistance services/emergency helplines
  • Sports equipment
  • Frozen foods.
    • Other issues that must be comprehended include: home working including liability aspects; holiday homes in UK and abroad; insurance of blocks of flats; sharing and renting of homes.

    Legal and regulatory considerationsImportant areas in this regard include:

  • The causes of legal liability for individuals
  • How torts can arise
  • How liability for fire damage arises
  • How liability for animals can occur, including liability under the Animals Act 1971 and the Dangerous Dogs Act 1991
  • How parents' liability for children arises
  • The key issues concerning the limitation of actions
  • The principal issues of occupiers' liability including the Occupiers' Liability Acts of 1957 and 1984
  • The common law position between landlord and tenant
  • The main aspects of the Defective Premises Act 1972 and its effect on the law relating to landlord and tenant, the vendor or lessor of property and builders, developers, sub-contractors, architects and local authorities.

    • Risk assessment, rating and underwritingIndividuals should also understand the general principles of premium rating and underwriting individual risks in household insurance. This understanding must reflect the various topics isolated in'scope of cover' outlined above. Additionally, those working in this area should understand the use of surveys in household insurance, including the importance of protections such as alarms and safes.

    Claims proceduresIndividuals should also know the principles of claims-handling as applied to household insurance. In particular the claims handling procedures specific to buildings, contents, all risks/ personal possessions, caravans, travel, livestock/ pets and personal liability (including owners liability). They should understand fraud prevention and detection measures and their operation, and be familiar with the role of the Financial Ombudsman Service.

    Information and communication technologyAdditional knowledge is required of the implications of IT development for the household insurance market, including: electronic data interchange (EDI); insurer/intermediary links; direct household insurance business.In all cases, it is essential that an individual is able to apply the principles defined above to a given set of circumstances.

    General conclusionsThe wider coverage afforded by household insurance and the significant number of sub-categories can sometimes mean that policies can be complex. Those working in this field must therefore possess a thorough understanding of the available cover and be aware of how the categories interact with and impact on each other. IT‘ Fiona Andrews is manager of the Faculty of Claims and head of CPD at the CII

    Test yourself on household insuranceThe market-standard examination subject for those wishing to gain a formal measure of their understanding of the subject is the paper within the CII's Certificate in Insurance qualification - Household Insurances (IF6). See how you do with these questions taken from the examination guide:Q1 What is usually the maximum number of consecutive days of unoccupancy allowed before an unoccupancy clause comes into operation?a) 21 daysb) 28 daysc) 30 daysd) 31 days.Q2 Under the Dangerous Dogs Act [1991] compulsory insurance is required for which breed of dog?a) Alsatianb) Bulldogc) Japanese Tosad) Rottweiler.Q3 With regard to workers who regularly visit a home, the occupiers' liability section of a household contents insurance policy will NOT normally pay out for death or bodily injury to:a) A domestic cleanerb) A dustmanc) A milkmand) A window cleaner.Q4 Which database has been established for insurers across the country, containing data and information on household claims to help combat fraud?a) ABIb). ALRc) MIBd) CUE.Q5 The process by which intermediaries submit proposals directly on to insurers' computer systems via a phone line is called:a) Digital interactive transmission.b). Electronic data interchangec) Hypertext transfer protocold) Uniform resource location.

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