What does house insurance cover?

There are two types of house insurance: buildings and contents cover. Buildings insurance covers the structure of your home, so the roof, walls and windows. It also includes the permanent fixtures, such as the fitted kitchen and the bathroom suite. Buildings insurance policies vary, but they should all insure your home in case of fire, storm, flood, subsidence, burst pipes, theft and falling trees.

Most insurers offer extra cover if you need it, though you will normally have to pay an additional premium. Accidental damage is one of the most popular policy add-ons. You might also want to consider legal expenses cover.

How much buildings insurance will I require?

You should have enough insurance to cover the rebuild cost of your home. In other words, if your property burnt to the ground, the insurance should pay for it to be rebuilt. But remember that the rebuild cost is not the same as the sale price or the current market value of your home. In fact, it is often lower.

Tenants do not need to worry about buildings insurance as it is the landlord’s responsibility
If you have just bought your home, the rebuild cost should be on the mortgage valuation. Otherwise, many insurers offer free online calculators. Or, you could visit the website of the Association of British Insurers, which has lots of useful information, including a calculator.

It is important to work out an accurate rebuild cost. If the sum insured is too high, you could end up paying over the odds for cover you don’t need. If it is too low, you could be left with an insurance shortfall – and a big bill.
Some firms offer so called unlimited cover, which means they will pay out, whatever the cost. It sounds great, but bear in mind that it might work out more expensive. The insurer might also calculate a sum insured based on the type of property, the number of bedrooms and the area. Again, it’s often a good idea to check the accuracy of the figure yourself.

Experts recommend that you regularly review the rebuild cost of your home to make sure the figure is up-to-date as prices inevitably change over time. You might also renovate or extend your home, which would also affect the rebuild cost.

If you live in an unusual or listed property, the rebuild costs can be more difficult to calculate and you might need to seek professional help from a surveyor.

Contents Insurance

You don’t just need to insure the structure of your home; you also need to insure its contents against loss or damage caused by theft, fire, storms, lightning, flooding or other water leakage, as well as explosions or earthquakes.
The contents of your home might be more valuable than you think. The average family of four estimates their contents to be worth £25,000. However, their true value is actually closer to £55,000. And it’s important to get the figure right so that your insurance will pay out in the event of a claim.

The best way to make sure you have adequate cover is to walk round your house room by room and make an inventory of your possessions. Jewellery, computers, iPods – they can all add up to quite a sum. And don’t forget the contents of your shed. Contents also include clothes, furniture, carpets and curtains. If you are unsure, it might help if you think of the things you would take with you if you were to move house.

Your insurer will probably ask for details of any valuable items, and it is important that you give all the relevant information. If not, you could invalidate the policy and the insurer could refuse to pay out in the event of a claim.

New for old

Contents insurance is usually arranged on a new for old basis. In other words, if your TV is damaged by fire, the policy will pay out for a new one. However, some insurers offer indemnity policies that take into account wear and tear. So, if your TV is 10 years old, it will only pay out its current value, not it’s price when it was new. Indemnity policies tend to be cheaper, but most people prefer new for old cover.

You can buy additional contents cover – and in some cases it might be worth the extra premium. Accidental damage is a popular add-on because it insures your possessions in case of an accident, perhaps if you spill red wine on the carpet or knock over a valuable ornament. Personal possessions insurance can also be useful because it insures items such as mobile phones, iPods, cameras and laptops when you take them out of the home.