Home Insurance: What everyone needs to know

Is home insurance a nightmare? Too confusing? Need some help? Read on…

If you've decided that home insurance might be a good idea, then there are two types to consider: and you might want both.

Contents insurance for things in your home (furniture, clothes, bedding, crockery etc) You don't need to be buying a house, simply renting and this would be a good idea.
Buildings insurance for the structure itself, walls/roof/ceilings and any fixtures and fittings (bathroom/kitchen) which aren't usually removable and are deemed permanent fixtures (this is usually requested by companies lending you a mortgage or sensible if you own a property outright).

Contents insurance – how much do you need?

Imagine that everything in your house was stolen! It's unlikely but have a go. It could (if you're very unlucky) all go in a fire or be destroyed by flooding. How much would you have to spend to replace all the stuff you had? (And presumably you'd buy new furniture and clothes etc rather than 2nd hand). Just start making a quick list – TV, Sofa, Bed, Bedding, clothes, coats, shoes, plates, glasses, cds, books, saucepans, curtains, rugs, shelves, cabinets… The list goes on.

Key things to think about

Accidental damage cover. You're covered for the standard fire, theft or flood claim but you can insure against accidents too e.g. paint on the carpet, dropped dinner service etc. Make sure you say if you want this cover added on.
Personal belongings cover. If you want cover for the things you take out of your home (money/credit cards/clothes/gym stuff/i-pods/walkmans/golf or tennis stuff/skis etc etc) look at this option as it's not automatically covered. Note: If you have this cover, you can also use it when you go on holiday (and generally you will not need to buy the baggage cover option on your holiday insurance)
Cycle cover. Are bikes automatically covered or do you have to specify? How much cover is there per bike? Do you have to specify the value of your specific bike? Look at the small print, even with the cover, you may not get a payout on a theft claim if your bike wasn't locked up or in a secured place. Ensure you know the terms.
Maximum limits on your policy. Just spend a few minutes looking at the limits given on your contents insurance. They cover a whole host of scenarios from food lost in the freezer to replacement money etc. Make sure you're happy with the levels given.
Valuables - Single Article Limit. Most policies will pay a total amount for valuables (look at their definition for valuables) but also a maximum per item around £1,500??. If you know you have specific pieces of jewellery, art, collectables etc that are more than that state them specifically on the policy and agree an insurance level with the insurer.
Pet damage. Tearing or ripping by pets is usually not covered at all.
Standard excess levels. Be aware of the standard excess level you'd have to pay in the event of a claim. It's usually around £100 for any contents claim. This is to stop everyone for claiming for all those little things that happen.
Voluntary excess levels. If you think you're unlikely to claim then you could opt for a higher excess level, i.e £200 or £300 and get a cheaper premium as a result.
Legal services and garden cover. These are often available – ask your insurer for details.

Can you make the premium lower?

If you are willing to take some precautions yourself, many insurers will give you a discount.

Fit door and window locks to their approved standards
Have a home alarm installed (check which ones the insurer approves)
Join the local Neighbourhood watch scheme

Also, the insurer may give yearly discounts if you don't make a claim during that time.

Top Tip: Many insurers give you a discount for buying both Contents and Buildings Insurance with them.

Buildings insurance - Why and how much do you need?

If you own a property outright, it makes sense to have this insurance. If you're buying a property with a mortgage, the lender will insist you have this (although you don't necessarily need to buy the lender's buildings insurance and can save money buying your insurance from another company).

Buildings insurance covers loss or damage to the property caused by fire, explosion, lightning, earthquake, smoke damage, storm or flood damage, heating fuel leaks, subsidence, heave, falling trees and branches. Check the policy wording booklet for full details.

There are excesses where you have to pay the first part of any claim (normally around £100) and it's usually high for subsidence claims (often £1000).

You can also pay for extra Accidental Damage cover to Buildings (as well as Contents) should you put your foot through the ceiling from the loft or crack a sink by dropping a hammer in it for example.

If you're buying with a mortgage, following the survey, the lender will specify the amount that the property is to be insured for. This is referred to as the re-build cost and this isn't the same as the market value of your property. Give the re-build cost to your insurance company.

There's a choice of being specific about your re-build cost (if you know if) or getting a 'Blanket Sum Insured' for Buildings, this is often a very good choice if you are uncertain of their re-build Sum Insured and do not want to go to the expense of paying a professional valuer.

If you want to find out more about how to calculate the re-build cost yourself, check out the ABI website where it shows you how to calculate the cost of re-building your house as well as lots of useful tips.

With all insurance, check the levels of cover given, the maximum limits, whether things have to be specified, and optional extras available. All insurance companies provide copies of their policywordings online, so you can check before you buy.

The Yahoo! House Price Centre is a free service from Yahoo! UK and Ireland that allows you to discover the price paid for residential property sold in England and Wales right back to april 2000, and in Scotland back to June 2003. This information is drawn from the publicly accessible Land Registries that record this information on behalf of the government.