Home insurance is often misunderstood, with many homeowners either underinsured or paying for cover they do not need. This guide explains what the different types cover and how to find the best deal.
- Buildings insurance versus contents insurance
- How much cover do you need?
- Getting the best price
- What is typically excluded
Buildings insurance versus contents insurance
Buildings insurance covers the structure of your home — the walls, roof, floors, windows, fitted kitchens, and permanent fixtures — against damage from events such as fire, flood, storm, and subsidence. If you have a mortgage your lender will require you to have buildings insurance as a condition of the loan.
Contents insurance covers your possessions inside the home — furniture, electronics, clothing, jewellery, and other personal items — against theft, damage, and loss. Renters do not need buildings insurance but should consider contents insurance for their belongings.
Many insurers offer combined buildings and contents policies at a discount.
How much cover do you need?
Buildings insurance should cover the rebuild cost of your property — not its market value. The rebuild cost is typically lower than the market value as it excludes the land. The Association of British Insurers has a free rebuild cost calculator to help you get this right.
For contents insurance, a common mistake is significantly underestimating the value of your possessions. Work through each room and add up the replacement value of everything you own. Most people are surprised by how quickly the total adds up.
Getting the best price
As with car insurance, never auto-renew. Compare prices every year using comparison sites and check directly with insurers. Increasing your voluntary excess reduces your premium — but only set it at an amount you could comfortably afford if you needed to claim.
Improving your home security with better locks, window locks, and an approved alarm system can also reduce your premium.
What is typically excluded
Most standard home insurance policies exclude damage caused by wear and tear, faulty workmanship, and general maintenance issues. Flooding is covered by most standard policies but subsidence claims can be complex. Always read your policy documents carefully.
Bottom line
Review your home insurance every year and compare prices before renewing. Make sure you have adequate rebuild cover for buildings insurance and do not underestimate the value of your contents. A combined policy often offers the best value.