Our guide to finding the right contents insurance policy
You probably can't imagine life without a television, washing machine or laptop computer, which is why it makes sense to insure the contents of your home. Contents insurance - unlike buildings insurance - isn't compulsory, but most of us would struggle to replace our precious possessions if they were stolen or damaged by fire or a flood.
What does contents insurance cover?
Contents insurance covers your home contents against loss or damage by theft or attempted theft, fire, explosion, lightning or earthquake. It will also insure against water leakage, storm or flood damage.
Insurers define 'contents' as the sort of things you would take with you if you were to move house, including furniture, clothes, electrical items, money and jewellery. Contents insurance also covers some fixtures such as carpets and curtains.
There are broadly two types of cover. Most policies these days are 'as new' or 'new for old', which means that if something is damaged, the insurance will pay the full cost of repair. If something is stolen, the payout will be enough to buy the equivalent new item. Check the policy details, though, as some items, usually clothes are not covered on a new for old basis.
You can choose an indemnity policy instead. Indemnity policies are cheaper because any payout is reduced to take into account wear and tear or depreciation in value. For example, if your five-year-old laptop is stolen, the claim will be based on its current value, not the price when it was new.
How much contents cover do I need?
The 'sum insured' is the maximum amount the policy will pay out if the contents of your home are completely destroyed, so it is important to get the figure right. Unfortunately, many of us get it wrong. Experts estimate that one in five households could be underinsured because they do not know the true value of their home contents.
It can help to go through your home room by room and make an inventory of your possessions - they will probably add up to more than you think. Don't forget to include items that are in the loft or stored outside in the garden and shed.
Some insurers calculate the sum insured according to the number of rooms in your home. It means you don't have to worry about working out the value of your possessions, but premiums can be higher - and of course the sum insured could still be inadequate.
There are usually limits on the amount that insurers will pay out for high value items, such as works of art, jewellery and some expensive electrical equipment. You should always check the limits and negotiate a higher maximum if necessary.
Make sure the sum insured is kept up to date. Your insurer might link the policy to inflation but you would need to contact the firm if you splash out on a particularly valuable item. Some policies are flexible and increase the level of cover at Christmas when you might have expensive gifts in the house. You might also need to check that your contents insurance is adequate to cover any generous wedding gifts if you have just got married.
Do I need additional contents cover?
You can often extend your policy to provide additional cover - for an extra premium. The most common extensions include:
- Accidental damage cover, so you would be insured if, for example, you accidentally knocked over a valuable ornament while you were doing the dusting.
- Accidental loss or damage cover for personal possessions that you take out of the home, such as clothes, jewellery, cameras and mobile phones. There is normally a limit on the value of any one item. So, if your camera is stolen, the policy might pay out only £500, even if it is worth £1000. You might also have to specify the items that you want to cover in this section.
- Home Emergency Cover will pay for any assistance or repairs due to a domestic emergency
- Some insurers will extend the policy to cover children who go away to college or university
Tips for cheaper contents insurance
You should never be tempted to skimp on contents cover, but there are ways to cut the cost of premiums.
- Shop around - Premiums can vary considerably between insurers, so it's important to compare quotes. But make sure you compare like with like - and be clear about the level of cover you need. Don't forget to shop around at renewal too. Your existing insurer will not necessarily offer the cheapest quote.
- Pay your premiums annually - Many insurers will levy an additional charge if you pay by monthly direct debit. If possible, try to make a one off, annual payment.
- Cut out the frills - If you do not need any added insurance extras, you could reduce your premium by choosing basic cover only.
- Raise the excess - Most insurance policies include an 'excess', which is the amount you pay towards any claim. If you agree to increase the excess you will usually pay a lower premium.
- Combine contents and buildings insurance - If you have to buy buildings insurance for your home, it is often cheaper to buy both buildings and contents cover from the same insurer.
- Build up a no claims discount - Insurers will usually reward people who have not made any claims with a cheaper policy premium.
- Prevention - It often pays to take precautions against a claim. High quality locks, burglar alarms, smoke alarms and membership of a Neighbourhood Watch scheme can all reduce your premiums