If you’re just starting out on the property ladder, or moving into your first flat, here’s an overview of Home insurance and the key things you need to know.
Home insurance is a blanket term for two different types of cover: buildings and contents insurance, which you can buy together or separately.
But do you really need both types of cover and how do you decide what type of home insurance cover to get? Here’s what you need to know.
Buildings Insurance
Buildings insurance covers the structure of your home, which includes the roof, walls and windows. It also covers permanent fixtures and fittings, such as fitted kitchen units and bathroom suites, if they’re damaged or destroyed.
You only need this if you own a property, and this type of cover isn't compulsory, but is advisable. If you think about how much it would cost to rebuild your house if it were damaged or destroyed. Also, lenders usually make buildings insurance a condition of offering a mortgage.
Buildings insurance policies vary, but will generally cover damage resulting from:
As well as your house, your garage, greenhouse and shed may also be covered. But this can vary so check the small print before you choose a policy, these may be additional elements you can add to your policy
It’s also important to understand that the amount of buildings insurance cover you need will be based on the amount it would cost to fully rebuild your property rather than its market value. A chartered surveyor can work this value out for you, or you can use the Building Cost Information Service’s cost calculator on the Association of British Insurers’ website.
Also, it’s important to bear in mind that buildings insurance doesn’t cover everything, such as your possessions. Always read your policy so that you know what is and isn’t included.
Contents insurance
Contents insurance covers the cost of replacing or repairing your possessions if they're damaged, destroyed or stolen.
Unlike with buildings insurance, your mortgage provider won’t insist on contents insurance, but it’s a good idea to make sure you’re covered in case of the unexpected[1]. After all, replacing damaged or lost possessions could cost thousands of pounds: the average UK home has around £35,000 worth of contents, according to research by the Association of British Insurers in 2018[2].
In order to get home contents insurance, you’ll first need to work out just how much your home contents are worth. That includes everything from your furniture and kitchen appliances to curtains, bedding, clothing.
It takes a bit longer to calculate than buildings insurance but it’s definitely worthwhile.Many people under-insure themselves, so it’s important to value your possessions as accurately as possible [link to how to value home contents article when published on Solved]. Then you can accurately work out how much cover you need.
Often contents policies will have a limit, so you should check that this will be enough to cover the value of all of your belongings. Contents policies also usually include a single item limit, so make sure it will cover your most expensive possession, such as an expensive piece of jewellery. Also make sure you consider if you need an item to be insured when you’re out of the house, as this is another way you could misjudge the cover you need.
You may want to get several quotes before choosing a policy. Also, check each policy contains the benefits that are right for you. For example, some insurance companies won't cover accidental damage as standard, in which case you may need to add this onto your policy as an extra.
Pick the right level of excess
One important consideration when you take out a home insurance policy is the excess.
This is the amount that you agree to pay towards any claim you make. So, for example, if you set the excess at £200 and then make a claim for £5,000, you will pay the first £200.
The higher that you set the excess, the lower the insurance premium will be. But don’t set the excess at a level you wouldn’t be comfortable paying if you needed to make a claim.
Together or apart
When you need both buildings and contents cover, you could get a combined policy with the same insurer. This might be cheaper and would mean you only have one insurer to correspond with. Or you could get buildings cover with one insurer and contents cover with another.
Whatever you decide to do, take your time to choose the best policy or policies for your circumstances.
Also, you may find a policy that suits your needs, but is lacking one particular key benefit for you. If that’s the case, then you could consider add-ons like Legal Expenses or Home Emergency cover.
Finally, read the small print
Home insurance policies vary, so try and take the time to read through the terms and conditions before you buy. Don't just choose the cheapest option. Think about what level of cover would really protect you when you need it.
To find out more about protecting your home go to Solved.
[1] https://www.moneyadviceservice.org.uk/en/articles/do-you-need-contents-insurance#do-you-need-contents-insurance
[2] https://insurance-edge.net/2018/02/22/abi-estimates-average-uk-home-has-35k-of-contents-often-under-insured/
