Home insurance is an extremely important expense that we all should invest in; it gives you the peace of mind and protection from unexpected damage, burglary, and a host of other issues that could cost you not only your home but what's inside it too.
The two main forms of ‘home insurances’ are contents insurance and buildings insurance, and it's vital to understand what you are covered for when looking for home insurance quotes to protect your property in the unfortunate case of damage, destruction, or burglary.
Contents Insurance
Home contents insurance covers the cost of replacement of the items in your home if they are damaged, destroyed or stolen. Typically, your contents insurance will cover items that are not fixed to the property and generally covers the things you would take with you when you move house. Think furniture, small appliances, and electricals, to list a few.
These personal items can be insured in a stand-alone contents insurance policy or as part of a combined home insurance policy teamed with buildings insurance cover.
Buildings Insurance
Buildings insurance covers the cost of repairing or rebuilding the structure of your home. This includes both the plan of your property, like walls and roofs, as well as built-in fixtures, such as toilets and fitted kitchens. Generally, any fixtures that are permanent are covered, and your policy should cover your costs if you needed to rebuild the home from scratch due to a cause out of your control, including but not limited to:
- Fire, smoke, explosions
- Floods, storms, natural disasters
- Fallen trees, lamp posts, aerials, or satellite dishes
- Vandalism or malicious damage
- Subsidence
- Vehicle or aircraft collisions
Included in the home insurance value will often be costs of demolition, clearance, and architect's fees for rebuilding, so it's likely the insurance value will be higher than the market value of the property.
Do I need home insurance, buildings insurance or contents insurance?
Rental Properties
When renting a property, the building's insurance is covered by the landlord and essentially included in the agreed rent. It is up to the renter if they choose to take out separate contents insurance for their personal items, as this tends not to be included.
Contents insurance is an option that should be considered case by case. If the overall value of belongings is low, insuring the contents of your rented home can cost more than the actual replacement value of the items within a few years. For example, it may not make financial sense for a student in a furnished rental property, whereas it tends to for family homes with many more years (and valuables) in their own home.
Purchased Properties
Buildings insurance is not a legal requirement for your home should you buy or own it outright; however, mortgage lenders do require buildings cover for the property before the completion of your purchase. Your building cover must cover the cost of a total rebuild in order to secure the mortgage and complete the purchase of your new property. This protects the lender in the case of damage to the asset.
Even if you are a cash buyer and don’t have a mortgage, it is advisable to take out and keep a building insurance policy for your properties. It’s important to bear in mind that, although unlikely, the cost of rebuilding your house if it were damaged or destroyed would be yours to bear alone without insurance in place.
Understanding different types of policies.
Working out which type of policy can be confusing. There are three main types of contents insurance for your belongings available and two main types of building insurance for your home. Whilst these sound very similar, it's important to know the difference to ensure you are not under or paying too much by being over-insured.
Contents insurance policies:
- Bedroom-Rated – Bedroom-rated policies use the number of bedrooms in the property to estimate the level of contents covered for the property.
- Sum insured – Sum insured policies require you to calculate the value of your belongings to set the level of contents covered.
- Unlimited sum insured – An unlimited sum insured policy covers all of your belongings with no limit, ensuring you are never under-insured.
Buildings insurance policies:
- Bedroom-rated – Bedroom-rated buildings insurance estimates the total cost of rebuilding your home based on the number of bedrooms.
- Sum insured – A sum insured buildings policy is calculated by working out the actual cost to rebuild your home, including professional fees. It's important to review your cover upon renewal, as the costs will change over time.
For both buildings and contents home insurances, it is important to regularly check your cover still matches your requirements and choose the type of policy that suits your situation. For example, a one-bedroom home could have extremely expensive contents whilst a 4 bedroom home could have lower budget contents making it important to make sure your policy is right for your situation. Not checking your policy is right for you could cost you a lot of money should damage occur and you are under-insured, or cost you more over your cover period through over-insuring.
Finding the best cover for you
Contents insurance is easily comparable on the internet to find the right cover for you at the best price. However, if you require buildings insurance, also it often works out better value to take out a combined insurance policy for homes.
Your mortgage lender may offer buildings insurance or be able to recommend their preferred insurers, but it is always worth shopping around to secure the best deals.
It's also important to remember that your chosen insurance policies will renew each year and will often increase in price even without claims on file. Again, it is worth shopping around, and if you bring a better home insurance quote to your provider, it's likely they will negotiate to match or even beat the quote.
