Home Insurance Guide – 4/8

In the moneysupermarket.com guide to home insurance we have already examined the basics behind buildings and contents insurance. However, there are very different levels of cover available within each of these areas and in part four we take a look at these options.

Buildings insurance – types of cover

The most important factor when insuring your property is to cover the full rebuilding cost and not the market value. The land under your house is not under threat from theft, storms and fire and as the land is normally about a third of the total property value it is important to make sure you cover rebuilding costs rather than market value. It can often prove less costly to rebuild your house from scratch than to buy another, as the land it sits on will usually remain unscathed.

Remember, the same type of house in a slightly different area can have a lower market value than another but yet cost just the same to rebuild in the event of a fire, etc. Therefore, cover your house against the rebuilding cost, and not against its market value.

To evaluate rebuilding costs follow the advice in our home insurance calculator section. (opens home insurance calculator content in new window)

Contents insurance – types of cover

It’s vital to avoid under insuring the contents of your home. Most policies will ask you to define a ‘sum insured’ – this will be the maximum your insurer will pay out. Under insuring can have drastic consequences because if, for example, the value of the contents of your home is £20,000 and you insure for £10,000 then you will effectively halve the value of your contents. So if you needed a new carpet valued at £2,000, your insurer would only pay £1,000. Be sure to calculate the correct amounts for all of the contents.

The best way to do this is to create a checklist of absolutely everything you have in and around your home. Be sure to include things you have made as well as anything that has been given to you because these things will need to be replaced too. Try to include an approximate date when the items were bought and include any receipts you might have. It’s a fairly lengthy process but well worth the effort to ensure that the contents are insured properly.

Also remember about the limit insurers could place on individual items, as it could be lower than some of your possessions. If this is the case you have three options:

• Negotiate for the full value to be included.
• Insure the item separately.
• Break the item down into components of lower value where possible, for example: a camera can have a lens, the main body and peripheral equipment insured separately.

Follow the advice in our home insurance calculator section to evaluate the cost of the contents of your home. (opens home insurance calculator content in new window)

There are a number of variables that can be considered with contents insurance.

Contents insurance – variable options

There are a number of add-on options available in addition to a standard contents insurance policy. These include:

• New for old replacement cover – This replaces items with equivalent new versions at today’s prices.
• All risks cover – Includes items taken outside your home. These items are usually specified individually, such as jewellery, mobile phones, etc.
• Legal cover – This pays for court costs. There are a number of different policies available including:
1. Compensation for injuries – If you are in an accident that’s not your fault you could claim compensation.
2. Consumer disputes – Disputes from buying, holding or selling goods.
3. Disputes with neighbours – Such as new fences, trees blocking light, etc.
• Freezer contents cover – Will pay for a fixed amount should the food in your fridge or freezer become inedible.
• Sports equipment cover – Such as golf clubs, squash racquets. They will not usually be covered while in use.
• Garden equipment cover – Protects against theft from a garden shed.

Additionally, an option to consider is accidental damage cover, which is standard in a lot of policies. This covers against DIY accidents, paint spillages, etc and is available in both building and contents insurance.

Make sure you examine exactly what your insurance policy covers against. All levels of cover should include compensation against theft and fire. However, it could be important to make sure you are covered against storms and flooding, frozen pipes, subsidence and more. Also, if you have extended or plan to extend your property make sure your policy reflects the changes you make.

Buildings & contents insurance combined

There could be discounts available for taking both policies out with the same insurer and it can certainly save some hassle. However, just because an insurer is good for buildings insurance, it does not mean that they will be the best for contents insurance and vice-versa. Be sure to examine all of the options available.

In part five we’ll take a look at cover in flood risk areas and landlord’s insurance and home insurance for tenants.