Home insurance generally takes the form of three types.
There is home contents insurance, which is basically the insurance of all the ‘stuff’ in your home. Then there is buildings insurance, which covers the home itself and fixtures attached to it. In addition to the first two, if you rent your home out, you’ll need special insurance to cover for buildings and/or contents insurance and, perhaps, additional risks such as loss of rent or public liability cover for common areas.
We have written a separate article about insurance for landlords here.
When you exchange contracts to buy a property you should immediately arrange for the property to be insured against the usual risks including fire, flood, subsidence and damage by other means. If you have a mortgage this will be an obligation of the mortgage agreement, but if you don’t have a loan on the property make sure you keep up your building insurance.
Many mortgage companies offer insurance but you are free to buy insurance from anyone and in many cases you’ll get a better deal by shopping around.
Building insurance is based on the cost of rebuilding your home and so it’s unlikely to be for a sum that equates to its value. The land, of course, remains, even if you are unfortunate enough to have your home burn to the ground.
The more risks you insure against, the larger the premium you are likely to be charged. Reducing risk by agreeing to pay a voluntary sum on any claim, known as an ‘excess’ will usually reduce the annual premium you are charged. However, remember that your policy might also cover things like blocked drains or storm damage and a high excess my make claims for such damage uneconomic.
The fewer claims you make on your policy the larger your ‘no claims discount’, as with car insurance. Always check your policy to make sure you know which risks are covered and which are not.
In addition to building insurance, most of us take insurance to cover the contents of the building too. This might include carpets, curtains, furniture, kitchen appliances and even things like bicycles and jewellery.
Many policies limit cover on specific items, like watches, cycles and the like. It’s usual for a cap of say £1,500 to be levied on any specific item. You will probably be asked to detail specific items of higher value, such as computers, mobile phones and jewellery and, again, there may be a claims excess to pay in the event of a claim.
If you want to cover specific items of higher value, you will need to detail these items and their value. It’s sensible to keep a photographic record of the item and also a copy of the purchase receipt and/or a valuation of the item somewhere safe. Remember, if you experience a burglary or house fire, these files may be vulnerable.
Many people do not realise just how much it would cost them to replace what they have in their homes. If you underestimate the value of contents in your home and then make a claim, you may find you are underinsured. In such circumstances, even if your claim is only partial in nature, you may find the insurers paying out only a proportion of the claim in accordance with the percentage by which you have underinsured!
Finally, make sure you check the terms of the policy. Are you covered ‘new for old’ or for ‘replacement’? Are items insured for accidental damage? If you lose an item away from home is that loss covered? Are some items already covered under separate policies?
Whatever insurance policy and provider you choose, always shop around at renewal. Many insurers rely on their customers being too busy to shop around. Simply obtaining a quote via a third party quote engine like confused.com or Compare the Market can save you a lot of money and every year. Make a diary note now.