Understanding Home and Contents Insurance

Understanding Home and Contents Insurance

No matter what kind of property you live in, it’s essential to make sure you have insurance in place to protect your home and its contents. With the right cover you’ll have the peace of mind of knowing that your building and possessions will be covered in the event of fire, flood, damage or burglary.

There are two kinds of home insurance: buildings and contents cover.

Buildings Insurance

While it isn’t compulsory, if you have a mortgage on your property your lender will usually insist that you take out adequate insurance cover, and that this is in place before you exchange contracts.

Buildings insurance covers the overall structure of your home, which includes the roof, walls, windows and permanent fixtures such as kitchen and bathroom suites. Individual policies vary, but you should opt for one that will insure your home in case of fire, storm, flood, subsidence, burst pipes, theft and falling trees.

You may choose to add extra cover to your policy, for example for accidental damage or legal expenses. Add-ons like this can be useful, but you will pay an additional premium for them.

If your house isn’t of a standard construction, is listed or has a thatched roof, you’re likely to need specialist insurance cover.

What isn’t covered?

Buildings insurance does not usually cover damage due to wear and tear, acts of war or terrorism. It’s also important to note that if your home is unoccupied for more than 30 days during the year, you could find this invalidates your policy. Always check with your insurance provider and read the small print of your policy to ensure the cover is right for you.

How Much Cover Do I Need?

You should ensure your policy is adequate to cover the rebuild cost of your home if it was destroyed beyond repair. The rebuild cost is often lower than the market value of your home, so do your research and make sure you’re not paying for higher cover than you need. Equally, it’s imperative to make sure you don’t have less cover than you need, as you’ll end up with an insurance shortfall if the worst happens. Your mortgage lender or insurance provider should be able to advise you on this, or you could use an online calculator or contact a professional surveyor.

Make sure you review the rebuild cost of your home regularly, especially if you renovate or extend the property.

I’m Renting My Property – Do I Need Buildings Insurance?

Tenants are not responsible for insuring the building they live in, this is the landlord’s job. You will however need to ensure you have cover for your belongings, in the form of contents insurance. It’s also worth considering insuring yourself for accidental damage to the property, to cover you in case you damage any of the landlord’s fixtures and fittings.

Contents Insurance

Whether you own your home or are renting, you will need to insure your contents against loss, damage or theft. It’s important to obtain adequate cover that will allow you to replace all of your belongings in the event of a claim, and it’s easy to underestimate the amount they are worth so do take the time to make a full inventory of your possessions, room by room. Be sure to include items in the shed or garage as well as all clothes, furniture, carpets and curtains should also be included.

Most insurers apply a limit on the maximum payout for a single item, so familiarise yourself with the terms and conditions of any policy to ensure you have enough cover for your most valuable items. You will need to give your insurer specific details of individual valuable items.

Indemnity or New for Old?

Most contents insurance policies are agreed on a new-for-old basis, which means that if an item is lost, damaged or stolen it will be replaced with a brand-new item of equivalent value.

Indemnity cover is a ‘wear and tear’ policy, which means you’ll only be covered for the current value of your items. So, if you have a five-year-old TV and it gets damaged beyond repair, your insurer will only pay out on your TV’s current value.

Indemnity policies usually come with cheaper premiums, but a new-for-old policy arguably gives you more peace of mind.

How do I Get the Best Deal?

If you need both buildings and contents insurance, it’s often cheaper to buy both policies through the same insurer. You can also negotiate a lower premium if you’re prepared to add a voluntary excess to your policy.