‘Home insurance, how exciting!’ said no-one, ever. But along with car cover, arranging home insurance is one of those life admin chores that can have a huge impact on your finances, so it needs doing – and doing properly.
Here’s how to choose what’s right for you.
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Types of home insurance
There are two main types of home insurance; you can buy them separately or as a combined policy:
- Buildings insurance covers the cost of repairing or rebuilding the structure of your home, along with any permanent fixtures and fittings like kitchen cupboards and bathroom suites. Policies can also insure outbuildings like sheds, garages and other features, including tennis courts, swimming pools and patios.
- Contents insurance essentially covers loss or damage of anything that would fall out of your house if someone came along and turned it upside down. This includes your furniture, electrical goods, soft furnishings and personal items like your clothes and jewellery.
What events does home insurance cover?
Insurers determine the scope of their own policies, so they can vary; but on the whole, you can expect your insurer to cough up for events like:
- Vehicle collision
- Storm damage, including damage by fallen trees
- Flood, including water damage from leaks or burst pipes
Like most things in life, the devil is in the detail, so it’s a good idea to double-check the terms and conditions set out in your policy and make sure you’re happy with them (or at least that you think they’re fair and reasonable).
One example worth highlighting is compensation for storm damage, as insurers sometimes have a specific definition of what a storm is – for example that wind speeds must be over a certain number of miles per hour.
Do I need home insurance by law?
No – you don’t need it by law. If you’re lucky enough to own your home outright, you’re under no legal obligation to buy a policy. If, however, you have a mortgage, your lender may make home insurance a condition of the loan.
Of course, if you don’t have a policy and your home or possessions are damaged or stolen, you’ll have to cover the cost of repairs or replacements yourself.
How do I choose the level of cover?
Needless to say, it’s crucial to get the level of cover right – this is the maximum amount of compensation you could get if you make a successful claim for everything you’ve insured.
For buildings insurance, the amount should be enough to cover the cost of rebuilding your home if it were completely destroyed (insurance isn’t an industry based on optimism). Plus, remember that the rebuilding cost isn’t the same as the market value of your property. If you haven’t a clue how to work out the amount, don’t worry; use either:
- Bedroom-rated formula – using the number of bedrooms your home has, insurers will come up with a high figure that safeguards against under-insuring your property. The downside is that you could end up over-insuring your home and paying a higher than necessary premium.
- Sum insured – this is bespoke and takes into account the type of home you have, materials and labour costs. Needless to say, unless you’re a builder or a surveyor, working out this figure is probably a job best left to the professionals; you’ll need to arrange this and cover any fees. If you opt for this method, make sure the policy you choose is index-linked, which means the sum insured will increase in line with rising rebuilding costs. If in doubt, ask your insurer.
Note: You’ll also need to consider any exclusions set out in your policy, as these could affect what is and isn’t covered, as well as the cost. For example, policies often exclude accidental damage, but you can usually pay a little more for the added protection.
For contents cover, there are three methods to work out the overall level of cover you need:
- Bedroom-rated – as with buildings cover, insurers will work out a figure based on the number of rooms you have.
- Sum insured – you’ll need to come up with a figure based on your belongings and agree this with your insurer.
- Unlimited sum insured – just like it says, there’s no limit – so you don’t run the risk of being uninsured – but bear in mind that your premium is likely to be higher than average to reflect this.
Note: You’ll need to make a note of any single-item limit, as discussed below, as this is the most you’ll get for any one item.
Steps towards getting the best home insurance policy
When it comes to insurance, there’s no one size fits all. The ‘best’ policy is one that meets your needs, so it’s wise to:
- Check any single-item limits in contents cover – if you own anything very valuable, just be mindful whether the amount covered is enough. You can usually insure pricey items separately for an additional charge with your insurer, but if the item is super-expensive or something specific like an antique or piece of art, you might want to explore specialist cover.
- Identify any exclusions – for example, if you’re in a flood risk area, check what the policy says about this and whether cover will be affected.
- Compare quotes – comparison sites can help you search for quotes quickly and conveniently – but don’t forget the big insurers like Direct Line and Aviva, which don’t appear on such sites.
- Consider using a broker – brokers search for insurance on your behalf; some specialise in particular areas and might also have direct relationships with certain providers. This could be a good option if you have a non-standard home, like a listed property or one with a thatch or a timber frame.
One of the golden rules about shopping for insurance is that it’s not necessarily about bargain hunting – it’s about getting what’s right for your circumstances.