FOOL SCHOOL
Insuring Your Possessions

October 19, 2005

One of the biggest problems you can face is the risk of losing the contents of your home. Could you afford to replace everything you own if it was lost in a fire or stolen? If not, then you need contents insurance regardless of whether you own or rent. In the latter case this is very likely to be your responsibility, not the landlord's.

People don't tend to take their house contents too seriously. But have you really thought what it would cost to replace that old sofa? It might only be worth £50, but you would probably need £1,000 to replace it with a new one. And replacing 200 CDs if they were damaged by fire would not be cheap. So make a detailed list, room by room, of all your contents and put an estimated replacement cost down for each one. You'll be surprised at how big the total is. Then think about your insurance policy. Maybe that new-for-old policy isn't so expensive after all. The alternative is an indemnity policy where deductions are made for wear and tear and depreciation. But then you have to fund the difference when you buy replacement items. To help you do that the Association of British Insurers (ABI) has a helpful spreadsheet here that gives a room-by-room guide to contents in a house.

In particular, make sure you have a comprehensive list of all your high value items. If only half your jewellery was stolen would you know precisely how many rings you used to have? More importantly could you describe them? Photographs of the more valuable pieces are a good way to keep a record. Valuations change too. The Antiques Roadshow provides many examples of people not realising that they owned valuable things. You can't expect an insurance company to pay out if you haven't told them that you own a Constable painting. If they are valuable the insurance company might ask you to take specific measure to protect them like installing a wall safe or take out separate or additional cover. You might want to think about marking your property too so that if the worst does happen you can identify it later.

Most house and contents insurance policies will also provide liability cover. That means if you live in a flat and overflowing water from a bath or dishwasher causes damage to property belonging to people living below, you are covered.

As with everything in finance it pays to shop around when you are buying insurance. Most policies will have an excess, an amount you pay in a claim whatever happens. If you can tolerate a higher excess, it might pay for itself through a lower premium. According to the ABI the average premium for domestic buildings insurance is £171 and for home contents it's £146. Despite the obvious benefits of insurance it is estimated that 6m homes, 22% of households, have no contents cover.

The threat generally is twofold, damage and theft. Damage might arise from problems associated with fire and floods, or it could have a different genesis. The failure of a freezer might ruin the food inside, a faulty washing machine could damage other kitchen equipment and a burst pipe could ruin your furniture.

A more likely scenario though is loss from burglary. People usually lose things like televisions and video recorders or jewellery, some of which may not cost much to replace. It's the emotional devastation of being burgled that tends to cause the most damage though so it's far better to spend money on good security and not lose your things in the first place. Good security will also help to reduce your insurance premiums.

Insurance companies offer no-claim bonuses on house insurance as well as car insurance. So here are a few tips, which might help to reduce your chances of being burgled as well as reducing your premiums:

Burglar Alarms

Burglar alarms are proven to reduce burglary risks so if you've got one you're likely to get a cheaper deal from your insurance company.

Locks

It almost goes without saying that you should change the locks when you move in and ensure that they conform to the British security standard BS3621 (that means they can only be opened by a key). Windows and patio doors need key operated locks and don't leave ladders or steps in the garden or in unlocked sheds. They, together with tools from an unlocked garage, can easily provide the means for a villain to gain entry through an upstairs window.

Make it difficult

Access to ground floor windows can be made more difficult by growing prickly bushes like holly, berberis and pyracantha under them. And don't plant hedges and tall plants close to doors. They could hide nasty people. Garden fences and gates should be kept in good order too, in fact anything to make life more difficult for the robber. If you go away on business or holiday use a timer switch to ensure lights, radios and TVs come on at appropriate times. Doing all these things, and joining your local Neighbourhood Watch scheme, ought to entitle you to a 5 or 10 percent discount on your premium.

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