Home insurance: buildings and contents cover

Article by StaySure

It is said that you don’t know how good your insurance company is until you make a claim. This may be true, but when it comes to what is probably your most valuable asset – your home – a bit of homework into the policy you choose is likely to pay off as well. There are two kinds of home insurance: buildings and contents cover. It is not compulsory to have either, but if you have a mortgage, your lender will usually insist on adequate buildings cover. As for contents, they are likely to be more valuable than you think, and you should think carefully about how much it would cost you to replace your possessions in the event of theft, fire, flooding or any other disaster. If you are unsure as to what counts as buildings and what counts as contents, imagine turning your house upside down and shaking it. Anything that falls out is contents. Anything that stays in place, from the walls to the kitchen sink, counts as buildings.

Making sure that you have the correct level of cover is vital. Research suggests that 20-25% of British homes are under-insured, and that for higher-value homes the figure climbs to nearer 65%. This could leave you seriously out-of-pocket in the event of something going wrong. If you insure your home or contents for too little your insurance company will pay out only a proportional percentage. So if the rebuild cost of a house is £300,000 and you had only insured it for £200,000, the company would only pay out two thirds of any claim. The same goes for contents. So a claim for £10,000 could be reduced to £7,500 if your total insurance is found to be 25% less than it should be. At worst, your policy may be declared null and void.

Another common mistake made by homeowners is to insure their buildings for the market value of the house rather than the rebuild cost, which is often considerably less. This won’t mean that the insurers will pay for a more expensive house in the event yours is destroyed, but it is likely to mean that you pay higher premiums. On the other hand, if your property is old, unique in any way, or listed, it is essential that you have an accurate idea of how much it will cost to rebuild. In the case of a listed building, the conservation officer can legally demand that the property is rebuilt to exactly how it was before the damage occurred, and with original materials, regardless of cost. If you are buying a house and having a survey done, your surveyor should be able to provide you with the rebuild cost. Alternatively, The Association of British Insurers has a rebuild calculator on their website.

When it comes to contents, the most important aspect is to check exactly what is covered and what is not, so read the small print carefully. Going for the cheapest standard policy could be a false economy, and make sure you check that accidental damage is mentioned – if it isn’t you won’t be covered for it. If you have an indemnity policy rather than ‘new for old’ cover, you will only receive the ‘market value’ for the item, which when it comes to something like a TV, may mean a downgrade. Many standard policies also pay out a maximum of £1,500 for any one item. In most cases you can bolt on additional cover, for a higher premium. Don’t be tempted to under-insure – high value items such as art, electrical equipment and wine collections are often overlooked. Ideally, take photographs of your rooms and any precious belongings. They could prove invaluable in the event of any mishap.

For a competitive quote on all your home insurance needs, check out the over 50s experts, Staysure.