Around one in three people are victims of burglary in their lifetimes. Add to that the apparently ever-increasing threats to properties from extreme weather and other disasters and the risks are clear. Yet three out of four people have no home insurance at all.
A Home insurance policy can cover not only the building, but lots of other things too. Most of them are optional, so you can choose to include them or not. Amongst the things to consider are the contents of the building, personal possessions that you own but that you take away from the building and your liability to other people if a part of your building causes damage or injury.
We are not
We cannot give you advice on specific insurance policies, or which one to buy. We can only advise you to check lots of policy terms and prices and use your own judgment. If you do need advice, please speak to a qualified Independent Financial Adviser.
When you compare prices it is worth comparing the features as well: a cheaper policy may not offer as much cover. Some of the 'big names' have policies that appear to be more expensive, but include options that would cost extra with policies that appear at first to be cheaper.
Look, too, at the list of events that are covered. For example, most policies will not cover damage caused by terrorism or vandalism. See the grey boxes on this page for more details on the options you have when you take out buildings or contents insurance.
You need to make sure that your policy will provide enough to rebuild your home if it should be damaged so badly that repair is not an option. This can be difficult. If you have only recently bought the home, the mortgage paperwork will probably help, but if you have owned the property for a while you may need advice to get an accurate figure. That advice could cost money.
what is covered?
Examples of the things the buildings part of the policy may cover are listed here.
Outbuildings such as sheds and detached garages.
Fixtures and fittings. These are things that you can't take away if you move, such as the toilet, fireplaces, built-in cupboards and decorations.
Boundary walls, fences and gates, although these are usually only covered if the main structure of the house is damaged at the same time by the same event.
Accidental damage, such as damage caused by DIY.
Some of these, such as accidental damage, may be optional extras with some polices.
There are two other alternatives. One is to over-estimate, so that you are certain the amount you specify will be enough, even if it is higher than necessary. This may increase the premium slightly, but it is better than being underinsured and is cheaper than paying for a professional estimate of the rebuilding cost. Another alternative is to go to one of the insurance companies that bases the insurance on the number of bedrooms, rather than the rebuild cost, or that has a standard rebuild sum in the policy. For example, some home insurance policies cover rebuilding costs up to £1million, so you don't have to worry about a cost estimate unless rebuilding the property is going to cost more than that.
what is covered?
Building contents cover can include the things listed here.
Appliances, furniture, clothing and other possessions in the home. Basic policies usually pay for replacement at their value when they were lost or damaged. You can get the replacement value, but this is often an optional extra.
Plants and other things in your garden or in your garden shed.
Personal possessions that are not in the building at the time they are lost or damaged, such as pushchairs and bikes.
The contents of your freezer, in case there is a breakdown or prolonged power cut.
Legal cover to help you if someone is hurt at your property or because of a problem with the building.
Accidental damage to things in the property.
Some of these, such as accidental damage and new-for-old, may be optional extras.
As with the building part of the insurance, you will normally need to estimate the value of the contents. Some policies will cover you for a certain value of contents, based on the size of the property. Even so, you need to make sure that the basic amount is enough, and to increase it if your contents are worth more.
The amount you are covered for is the maximum you will be paid if everything is lost. Even if you do not lose everything, if your cover is less than the true value of all your contents, then the amount you will be paid if you make a claim will be reduced. For example, if the total value of all your contents is £30,000, but you only have contents cover for £15,000, you will only get half the amount of your loss. Even if you only claim for one item, you would only get back half the value that you would have received if you had covered the value of your contents fully.
Insurers have a maximum amount they will pay for the loss of some single items. You need to be careful to list any items that have a value above the insurer's limits. The limit will vary depending on the kind of thing insured. For example, there may be a maximum of £1,000 for any one item of jewellery or £300 for cash. If you have items that are worth more than the single item limit for that kind of thing, you should insure them separately. This can be done as part of the same policy, by listing them and paying a slightly higher premium. You can also consider a specialist policy in the case of some things, such as valuable musical instruments, professional tools or cameras.
Reducing the risk can cut your premium
You can reduce your premium by reducing the risk that the insurance company is covering. Examples of ways to reduce the risk are:
- make sure that door and window locks are the sort approved by insurance companies
- fit a burglar alarm - one that connects to a remote centre is best. You can get up to 7.5% discount if you fit an alarm that meets the NACASS standard
- fit and maintain an approved smoke or fire alarm
- join a Neighbourhood Watch Scheme
Other ways to reduce your premium
- Increase the amount of excess you are prepared to pay. With most policies you have to pay at least something when you make a claim, but you can reduce your premium if you increase the amount.
- If you have had a policy and not claimed on it, look for a policy that pays a no claims discount.
- Look out for special offers. Many companies will offer a discount if you buy online.
Most insurance companies give you the option to pay your premium in monthly instalments, usually by direct debit. Some companies will simply divide the annual premium by 12 and there is no extra to pay.
However, some other companies treat the transaction like a personal loan of the annual premium, which you pay back in monthly instalments with interest. The effective rate of interest can be high.
Be careful to compare the annual premium with the total amount you pay by instalments, so that you can tell how much interest is being charged.