A beginner’s guide to home insurance

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If you don’t know where to start when buying your home insurance, check out our beginner’s guide to this valuable financial product.

Uninsured burglary victims fork out £200 million per year, according to research from Clydesdale and Yorkshire Banks. Without home insurance you could lose thousands if your home were broken into.

Although we tend to use home insurance as a generic term, it can mean one of two things: buildings or contents cover.

Buildings insurance

This kind of insurance covers the structure of your home and permanent fixtures such as fitted kitchens.

Although every policy is different, buildings insurance will often cover you against hazards such as:

• Fire
• Flood and other water damage
• Subsidence
• Vandalism
• Alternative accommodation if you are forced to leave your home

Remember to read the fine print carefully to check for exclusions and technicalities when buying a policy. For example, some policies do not protect against damage caused by a burst pipe.

Most buildings insurance policies also cover outside buildings such as sheds and greenhouses. Again, you should double check your policy.

Having buildings insurance is a prerequisite before you can take out a a mortgage. The amount of cover should be calculated according to the cost of rebuilding your property (and not its current market value). The Association of British Insurers’ website offers a calculator to help you determine the cost of rebuilding your home.

Contents cover

Unlike buildings cover, you are not legally required to have contents cover but it can be invaluable if something goes wrong in your property.

Contents insurance can cover all of your possessions – from the food in your fridge to the clothes in your wardrobe.

When buying contents cover, you should be aware of the difference between standard perils and accidental damage cover.

With standard perils, you will generally be covered against hazards including fire, explosion, earthquakes, lightning, falling trees and theft. Because policies do vary, you will need to pay close attention to the small print.

Accidental damage, however, should pay out if damage is caused by your own carelessness. For example, you may be covered for spillage on furniture and smashed windows.

Single article limit

Contents insurance normally includes a single article limit (SAL) – the maximum amount you can clam for one item on your home insurance.

If you have expensive items in your home that exceed the SAL, you may need to take out separate cover.

All risks

An all risks addition to your home insurance will cover your belongings when you leave your property. Items such as iPods and mobile phones will be covered when you take them outside because they are classed as temporarily away from the property.

This could mean you don’t need separate insurance for your more valuable belongings.

Personal liability

It is possible to protect yourself against personal liability claims through your home insurance. This would cover the cost if someone were injured on your property or damaged their possessions as a consequence of your negligence.

How to cut costs

Having security features such as an alarm system and decent locks may lower the cost of your premiums. From your insurance company’s point of view, this makes your home less likely to be broken into.

Buying contents and buildings cover from the same provider could reduce the cost of your premiums. As always you could make significant savings by shopping around for a better deal with a new provider.

Making frequent claims on your home insurance may cause your premiums to increase. If the damage to your home will not be expensive to repair, you might want cover the cost yourself.

**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**

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