Home insurance is a catch-all phrase for the policies you put in place to protect your property and its contents against the unexpected.
Having home insurance is important whether you’re a homeowner or a tenant. No matter if you live in a flat, a bungalow or a mansion, it’s wise to have it.
The Association of British Insurers (ABI) says 76% of households have contents insurance and 64% have buildings cover.
Home insurance covers you against theft. It also protects you against damage caused by unexpected perils. These include flooding, fire and explosions, burst pipes, falling trees, riots, storms and subsidence.
There are two kinds of home insurance: buildings insurance and contents insurance.
Here, we’ll explain these so you can work out what exactly you need to for your circumstances.
We’ll also tell you the three blunders never ever to make…
Types of Home Insurance
First up, there’s buildings insurance. This covers the bricks and mortar of your home. It’s there to protect the structure of your home and any permanent fixtures and fittings. These include your fitted kitchen units and bathroom suites. Policies also usually cover garages, greenhouses and garden sheds.
So if you’re a homeowner, this is a must. Most mortgage companies will insist you have buildings insurance as a loan condition.
If you’re a tenant, however, buildings insurance is usually your landlord’s responsibility.
Second, there’s contents insurance. This covers the cost of replacing or repairing your possessions. These include items such as your TV or carpets, if they’re damaged, destroyed or stolen.
You need contents insurance if you’re a homeowner and if you’re tenant too.
Third, there’s combined buildings and contents insurance. This is right for homeowners. It’s almost always a cheaper way of buying insurance than getting two separate policies. But read the small print. Some insurers make you pay separate excesses on both parts of the policy.
For a free quote for Buildings and Contents Insurance, contact Mortgage Advice Services on 01332 257087
The 3 Home Insurance Big Errors to Avoid
Blooper number 1: Never ever auto-renew
Yes, you have a busy life. But by just letting it roll over and auto-renewing your current annual policy you could be wasting £100s.
This is one area where loyalty rarely pays. Insurers hike the cost of cover for loyal customers at the time of renewal. They then use the profits to offer new customers the better deals.
Most people would be better off by shopping around each time by using comparison sites or a specialized broker.
This is important because home insurance costs are rising. By as much as 8% for buildings cover and 4% for contents year on year, reports Moneysavingexpert.com. To keep down costs, make sure you never just auto-renew.
Blooper number 2: Don’t over-cover with your buildings insurance
A big gaffe many homeowners make is to cover themselves for the market value of their property.
Again, you could be wasting £100s. All you actually need to insure is the ‘rebuild value’. That’s how much it would cost to rebuild the property if it were knocked down.
How do you find this out? If you’ve an unusual, listed or valuable property, then you could commission a survey. But the Association of British Insurers’ (ABI) can help most people. To get a reasonably accurate rebuild value, visit the ABI’s calculator here.
As an example, the ABI quotes £190,000 for the rebuild value of a typical four-bed detached house. It cites £80,000 for a typical two-bed semi-detached bungalow.
Blooper number 3: Don’t under-cover your contents insurance
Under-insuring means you’ll get less than the value of your items when you claim.
Say you insure £20,000 of possessions when you actually have £40,000. When you need to make a claim, you’ll only have 50% of your contents protected.
Companies will then pay you pro-rata according to the % of the true value covered. So when you claim for your damaged £5,000 all-ultra HD TV, you’ll only get paid out £2,500.
To get this right, go from room to room and add up everything. This means even smaller items such as clothes, on a ‘new-for-old’ basis. Don’t forget the lawnmower or equipment in your garage or garden shed.
But as a rough pointer, the value of home contents for the average UK household is £45,000.
You then have a choice of policy extras. These include ‘new for old’ and personal possessions cover (so items are covered if you take them away from home). Or home emergency cover (to pay for the cost of calling out a plumber or tradesman).
How to Choose Your Home Insurance
Get in possession of all the facts about the your re-build cost and your home contents value. Then make use of the range of comparison sites available.
Be careful to look at the terms and conditions to make sure they meet your needs. If you’re unsure about any aspect though, it’s often worth using a specialist broker.
The same goes if your circumstances are not standard. These include living in a property that’s listed, thatched, made of wood or has experienced floods or subsidence.
A good broker will save you money. They know the market. They’ll be able to find you the home insurance policy that meets all your needs and is good value too. They’ll check the complex stuff in the small print for you too.