Insuring Your Home: Choosing The Right Cover

Choosing the right house and contents insurance is important to protect your assets against disasters and mishaps. When selecting a policy, it is crucial to understand the difference between building insurance and contents insurance. Building insurance covers the structure of your home and permanent fixtures, while contents insurance focuses on your possessions. You can purchase these policies separately or as a combined package. To make an informed decision, research and compare different insurers, considering factors such as coverage, exclusions, and optional extras. Calculate the cost of rebuilding your house and the value of your possessions to ensure adequate coverage. Additionally, evaluate the reputation of the insurer and read the fine print to know exactly what is covered.

Understand the difference between buildings and contents insurance

Understanding the difference between buildings insurance and contents insurance is key to choosing the right home insurance.

Buildings Insurance

Buildings insurance covers the physical structure of your home, including the roof, walls, windows, and permanent fixtures like a fitted kitchen, garage, or conservatory. It protects the fabric of your home in case of accidents, damage, theft, natural disasters, and third-party claims. It is not compulsory to have buildings insurance, but most mortgage lenders will insist on it as a condition of your loan.

Contents Insurance

Contents insurance, on the other hand, covers the items inside your property, such as furniture, appliances, gadgets, clothing, jewellery, and other personal belongings. Generally, anything that can be carried out of your property is covered by contents insurance. Contents insurance also covers items in the event of theft or damage caused by fire, flooding, or other perils.

Combined Policies

You can buy buildings and contents insurance separately or opt for a combined policy that covers both. Combined policies are convenient for homeowners as they package the cover in one policy, but they may not be suitable for landlords, whose needs tend to be more specific.

Calculating Cover

When calculating how much cover you need, it is important to work out the 'sum insured' figure, which is the total amount the insurer will pay to repair or replace your home or belongings. You can use online calculators to help determine this amount, taking into account the cost of rebuilding your house from scratch, including professional fees. For contents insurance, go through each room and estimate the cost of replacing each item.

Exclusions and Extras

Be sure to check what is excluded from your policy and what optional extras are offered. For example, some policies may cover ancillary rebuilding costs, debris removal, environmental upgrades, or cover while moving house.

Calculate the cost of rebuilding your house

When it comes to choosing home and contents insurance, one of the most important factors is calculating the cost of rebuilding your house. This figure, often referred to as the 'buildings sum insured', is crucial to ensure you have adequate coverage in the event of a total loss. Here are some detailed steps to help you calculate the cost of rebuilding your house:

• Understand the difference between rebuild cost and market value: The rebuild cost of your home is different from its market value. The rebuild cost focuses solely on the amount of money required to rebuild the structure, while the market value takes into account factors such as location, access to amenities, and desirability.
• Use a rebuild cost calculator: There are online calculators that can provide a rough estimate of the rebuild cost. These calculators will ask for details about your home, such as its age, the number of bedrooms and bathrooms, the type of roof and walls, and the external floor area.
• Consider using 'elemental estimating': When using a calculator, look for one that uses 'elemental estimating' rather than a simple 'cost per square metre' calculation. Elemental estimating takes into account various details about your home, such as whether it is built on a slope, the quality of internal fixtures and fittings, and the year it was built.
• Account for supplementary costs: When calculating the rebuild cost, remember to include supplementary costs, such as accommodation during rebuilding and removing debris from the site. These costs can add up, so it's important to factor them into your calculations.
• Get a professional appraisal: If you want a more accurate assessment, consider hiring a chartered surveyor or an independent appraiser who specialises in rebuild costs. This is especially important if you live in a non-standard property or a listed building. They will provide a detailed assessment and ensure you have the right coverage.
• Review and adjust your policy regularly: Remember to review your policy regularly, as rebuilding costs can change over time due to factors such as inflation and fluctuations in the cost of labour and materials. Discuss any changes to your home, such as renovations or additions, with your insurance provider to ensure your coverage is up-to-date.

Check for exclusions, caps and limits

When choosing a home and contents insurance policy, it's crucial to understand the exclusions, caps, and limits to ensure you're adequately protected. Here are some essential points to consider:

Exclusions

In home and contents insurance, exclusions refer to specific incidents or perils that are not covered by the policy. It's important to identify these exclusions to understand your coverage limits better and determine if you need additional coverage. Common exclusions in home insurance policies include damage caused by floods, earthquakes, and earth movement. These perils often require separate coverage or an additional endorsement from your insurer. Another common exclusion is maintenance and repair work, such as updating plumbing or electrical systems. Vermin infestations, including insects and rodents, are also typically excluded from home insurance policies.

Caps and Limits

Caps and limits refer to the maximum amount your insurance provider will pay out for a covered loss. Understanding these limits is crucial to ensure you're not underinsured. While home insurance covers the cost of repairing or rebuilding your house, there may be caps on certain categories of items. For example, there might be limits on valuable items such as jewellery, art, and collectibles. If you have high-value possessions, consider asking your insurer about endorsements for these items, as they may offer coverage for their full replacement value. Contents insurance policies also usually set limits for valuable items, such as a maximum amount per item and a total limit for specific categories like jewellery.

Additionally, home insurance policies often have a "sum insured" amount, which is the maximum they will pay out in the event of a total loss. To avoid being underinsured, it's important to accurately calculate this sum, taking into account the cost of rebuilding, repairing, or replacing your home and belongings. Some insurers also offer a "safety net" or "safeguard" option, where they will add a certain percentage (up to 30%) to your sum insured amount in case of a total loss.

Optional Extras and Add-ons

Some insurance providers offer optional extras or add-ons to your policy for an additional fee. These can include coverage for ancillary rebuilding costs, debris removal, environmental upgrades, electrical motor burnout, cover while moving house, visitors' contents, and vet bills.

In summary, when choosing a home and contents insurance policy, carefully review the exclusions, caps, and limits to ensure you have adequate coverage. Don't hesitate to contact your insurer to clarify any points and consider optional extras to enhance your protection.

Compare quotes from multiple insurers

Comparing quotes from multiple insurers is a crucial step in choosing the right house and contents insurance policy. Here are some detailed instructions and considerations to keep in mind when comparing quotes:

• Get quotes from multiple insurers: Request quotes from at least three to five different insurance providers. You can do this online, through captive agents, or by working with an independent agent or broker who can provide quotes from multiple companies.
• Compare like-for-like policies: When reviewing quotes, ensure you are comparing the same type of cover, sum insured, excesses, and optional cover. This accuracy will ensure your results are relevant to your specific situation.
• Consider your coverage needs: Understand the different coverage types offered and choose a policy that suits your needs. For example, consider whether you need additional coverage for valuable items, portable contents, or natural disasters such as floods or earthquakes.
• Review the details: Pay attention to the fine print and review each quote thoroughly. Check the coverage amounts, deductible, policy type, and whether your belongings are insured on an actual cash value or replacement cost value basis.
• Evaluate other factors: In addition to cost, consider other factors such as customer service, ease of doing business, and your preferred method of communication and policy management.
• Choose your policy: Consider your budget, but also the company's financial history, customer satisfaction ratings, and coverage offerings. Choose a policy that offers the best combination of these factors to suit your needs and risk tolerance.

Consider your excess

When taking out home insurance, you'll need to consider two types of excess: compulsory and voluntary.

Compulsory Excess

Compulsory excess is a predetermined amount that you'll need to pay if you make a house insurance claim. The amount of compulsory excess is decided by your insurance provider and will only be used if you make a claim. It's worth noting that compulsory excesses may vary under a single policy. For example, your policy's overall compulsory excess may be £100, but there may be a separate compulsory excess of £1,000 for subsidence. In this case, you'd have to pay £1,000 for any subsidence claim, but for any other claim, you'd only pay £100, unless they have their own excess.

Voluntary Excess

Voluntary excess works in the same way as compulsory excess, but the amount you pay is chosen by you. You can decide how much you wish to pay, which can be as little as zero. You may find that the more voluntary excess you pay, the cheaper the overall cost of your premium. However, you'll need to pay both voluntary and compulsory excess when you make a claim.

The amount of excess payable on your home insurance should initially depend on how much you can afford. You should be realistic about the amount of cover you need. If you're combining both contents and building insurance, you need to give an accurate value of your contents.

The voluntary excess shouldn't be of greater value than any claim you may make. This is because it may not be financially viable to claim for minor incidents, like a cracked television screen, as the combined excesses may cost you more than the television is worth. In this case, you might be better off buying a new TV and avoiding making a claim.

How to Choose Your Excess

When it comes to choosing your excess, there are two main scenarios to consider:

• Set a higher voluntary excess to lower your premium, but you would have a higher excess to pay when making a claim.
• Set a low voluntary excess, which would mean your premium saving would be lower.

The first scenario is the more economical option, but if your financial situation is unpredictable and access to funds is tricky, it could mean you don't have the ability to pay it should you need to make a claim. On the other hand, the second scenario means you'll pay more for your policy, but if you need to make a claim, your excess will cost you less, which could be the safer option.

Frequently asked questions