Your new home is probably the biggest investment you’ll ever make. So it makes sense to protect it against problems and disasters like floods, storms, fires, subsidence and burglary. There is a lot you can do to prevent these issues occurring, or to stop them causing more damage than they have to. For example, you can beef up the security on your house or flat to make it harder for thieves to get in, or you can keep your home well maintained so the effects of bad weather are kept to a minimum.
But no matter how well prepared you are, things can still go wrong: and this is where property insurance comes in.
Types of property insurance
There are two types of cover for homeowners: buildings insurance and contents insurance. Buildings insurance covers the fabric of your property, such as the roof, walls, floors and ceilings. It is largely designed to protect you against issues like floods, subsidence, and damage caused by bad weather. It would also go towards your rebuilding costs if your home was damaged or destroyed by fire.
Contents insurance, on the other hand, is intended to cover your possessions against things like burglary, fire or even accidental damage. As a rule of thumb, anything you could take with you when you move home would be covered under a contents policy, while anything you’d leave behind comes under buildings insurance.
Getting the right cover
Insurance isn’t just there to pay out when something goes wrong: it also offers valuable peace of mind. If you have the right insurance policy, you can rest assured that if the worst does happen to your home, you won’t lose out financially. This is why it is important to make sure the cover you take out is exactly suited to your needs. There are a number of mistakes that people make when applying for cover or choosing a policy: these can either mean they are paying too much in premiums, or they aren’t properly insured.
Buildings insurance: When you apply, you’ll be asked for the rebuild value of your home. This is so the insurer knows how much it would cost to rebuild your property from scratch, if it was destroyed in a fire, for example. The rebuild value, however, is not the same as your home’s value on the open market. Rebuilding costs are more or less limited to the price of labour and materials, so are likely to be lower than the figure you’d hope to sell for. Price-comparison sites normally include rebuilding cost calculators so you can make sure you’re insured for the correct amount – otherwise you could end up paying too much for your policy.
Contents insurance: When it comes to contents, however, the most common problem is underinsurance. Householders regularly underestimate the value of their possessions. If an insurer finds out that you haven’t got enough cover, they can reduce the value of any claim accordingly. When you are asked how much cover you want on a contents policy, go round your house from room to room, calculating the total value of everything from electrical equipment and furniture to clothes and carpets. Remember, in the event of a fire or serious flood, you could need to replace the lot.
As well as this basic type of cover, home insurance can offer some additional protection – although you’ll usually have to pay more for the privilege.
These add-ons are more likely to form part of your contents policy.
- Accidental damage cover: If you spill red wine on your carpet or your dog knocks over your antique vase, you are normally not covered under your contents insurance. But you can opt to have accidental damage cover for an extra fee.
- Legal expenses cover: Again, for a small extra charge, you can add protection that enables you to claim the costs of taking legal action if you were injured in an accident or if you were sacked unlawfully, for example: the action doesn’t have to be linked to your home.
- Home emergency cover: This gives you a 24-hour helpline to call if your boiler breaks down, say, or one of your water pipes bursts. You’ll usually have to pay for the service, but some policies include this at no extra charge.