Home insurance is two types of cover often combined into a single package.
Buildings insurance covers the property’s structure and any permanent fittings, like bathroom suites and fitted kitchens, should they be damaged or destroyed.
Table of contents
Contents insurance covers replacing or repairing everything else, from kitchen spoons to garage bikes, should they be lost, destroyed or damaged.
Buildings and contents insurance guards against a wide range of perils – and standard cover can be extended by paying a few pounds more.
Home Insurance Policy Add-Ons
Standard extras include public liability cover that pays compensation if a visitor falls ill or suffers an injury while visiting your home, legal expenses and gadget cover if you take a laptop or smartphone on a trip.
Buildings and contents insurance for the home pays out if your home is impacted by fire, flood, subsidence, storms, burst pipes and theft.
Buying the policies together is often cheaper than purchasing a standalone cover, but not everyone needs both.
Deciding On The Cover You Need
The level of protection you need depends on your property status.
Homeowners with a mortgage
Most banks and building societies demand borrowers take out buildings insurance as a condition of the loan to protect the value of their security.
A policy should be ready to exchange contracts when the property becomes the new owner’s responsibility. The property should be insured at the rebuild cost, not market value.
If you are buying a leasehold home, the freeholder typically takes out buildings insurance but passes the cost back to you through the service charge.
Homeowners without a mortgage
Building insurance is sensible even if you own your home outright to protect your savings against the cost of repairs.
If you rent your home
Renters are responsible for contents insurance for their belongings, while landlords should take out buildings’ cover.
For furnished properties, landlords would usually have additional contents cover for the contents listed on an inventory.
Students renting away-from-home accommodation during term time should look to their parent’s home insurance first as some policies will cover their belongings at university. Some universities have contents insurance for students living in halls of residence.
What Does Home Insurance Cover?
The home insurance trade body, the Association of British Insinsurers (ABI), says one in five claims fail because customers do not understand their cover.
The ABI argues strongly for reading the small print of a policy.
Buildings insurance covers the property structure – walls, wallpaper, ceilings and permanent fixtures and fittings like baths, toilets, and fitted kitchens. Cover usually extends to the cost of any emergency temporary alternative accommodation, should your home be uninhabitable while under repair, such as after a flood. Policies may cover garages, greenhouses and garden sheds, but they vary, so check that the policy meets your needs.
Contents insurance covers your belongings – a good indicator of if something is included under the policy is if you can pick it up and take it with you if you move. If you can, it’s likely to come under your contents insurance.
How home insurance works
Contents include furniture, electrical gadgets and your possessions, such as jewellery and other valuables. There is usually a limit on expensive items above a particular value. If any items are above that value, you may need to pay an extra premium to cover them.
Extras that come as paid-for add-ons include accidental cover – for example, spills or breaking a window; damaging belongings away from home, the cost of legal advice and help in a home emergency – like a pipe leak.
All risks cover is insurance-speak for away from home cover that can include students at university.
Home insurance is not a maintenance contract, so does not cover wear and tear.
Excess And Sum Assured Explained
The excess is the part of the claim you pay, so the payment from the insurer is always the full claim amount less any excess.
Paying an excess reduces the insurer’s risk, making the overall policy coster. The higher the excess, the less you pay.
A voluntary excess is set by you and is the amount you are willing to pay if you make a claim.
The insurer sets a compulsory excess.
The sum assured is the maximum an insurer will pay to settle a claim.
For buildings insurance, this should at least equal the rebuilding cost of your home.
For contents insurance, the best cover is new-for-old, not the current value of your belongings. Don’t forget to revalue your cover if you buy something expensive.
Insuring Expensive Items
Your insurer will likely set an overall claims limit for valuables such as jewellery, art and sometimes high theft risk goods such as electronic equipment. Check if your policy has a single item limit, such as £1,500 for a camera. Tell the insurer if your valuables are worth more than these limits, as you may cover them by paying an extra.
You may have to get an expert valuation of items like jewellery or art.
Home Insurance FAQ
Peer-to-peer arrangements like house swaps or holiday lets are not usually covered under standard home insurance, but discuss them with your insurer.
They may accept the risk and charge you extra or decline to cover damage or theft.
If your insurer refuses to cover the arrangements, plenty of specialist insurers will.
The government and insurance industry put together a scheme called Flood Re to cover homes at risk of flooding. The scheme aims to help householders in flood-risk areas find affordable home insurance.
Taking out home insurance isn’t compulsory, but most people consider the cover a necessary cost to protect their homes and belongings.
Most mortgage lenders make taking out buildings insurance a condition of the loan to protect their investment. Other than that, buying home insurance is a choice.
Industry figures suggest the average UK home is worth around £290,000, with contents valued at £35,000. The average cost of insuring a home is around £150 a year.
If your work involves making telephone calls or computer work, call your insurer and let them know. Most insurers will extend the policy to cover business equipment.
However, you will need business cover if you are setting up a production line or have converted a double garage into a car repair shop.
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