While the cost is certainly important, it’s not the only thing to consider when getting home insurance. Let’s take a closer look at the important terms, different types of insurance, levels of cover, and other important information you should know before signing on the dotted line …
1) Contents and Building Insurance
There are two main types of insurance for your home — contents, and building. You can buy these separately, but getting them combined into one plan works out cheaper. Of course, you’ll only benefit from that if you actually need them both.
Contents Insurance – As the name suggests, this covers the contents of the home, including your personal possessions, electronics and appliances, and fittings.
Buildings Insurance – This covers the structure itself and usually any gates, fences, and secondary structures like garages. If you are renting, building insurance is not your responsibility. If you own the home or have a mortgage, it’s the only way you can protect the property from serious fires and other accidents and disasters that can damage the structure.
2) Rebuild Cost
The rebuild cost of your home will be estimated when you take out building insurance or a combined plan. This isn’t the current market value of the house, it’s the cost of rebuilding it if it was destroyed. It is therefore important not to get this overestimated as you will then be needlessly paying more on the policy.
3) Do You Want New for Old?
A new for old contents insurance policy will cover the value of brand new items. For example, if you make a claim for a TV and home entertainment system, you’ll be covered for the cost of buying it all brand new, rather than its second-hand value. Other policies will only cover the second-hand value.
The policy price is not staggeringly different, so it’s usually best to opt for ‘new for old.’
4) Beware of Valuable Items
Contents insurance is intended for everyday items, not particularly valuable items. If you have an expensive wedding ring passed down through the generations or a valuable collector’s painting, you will need to insure these separately.
In practice, most policies have a limit on how much you can claim for individual items. Sometimes this might even be less than some of your tech and electronic items. If that’s the case, you may also want to consider ‘gadget insurance.’
Excess is the amount that you must cover yourself if you make a claim. In other words, if you went with £1,000 excess, you would not get a pay-out for any damage valued below £1,000 and would need to pay £1,000 on any claim above it.
The higher the excess the less you have to pay each month, so it’s a bit of a balancing act. Only go with what you can genuinely afford.
Tip: If you choose a higher excess to benefit from lower premiums, you could take out a loan online to cover the excess when you make a claim. If you do your sums, this can still work out cheaper than having a lower excess.
6) Is Your Home Special?
Most regular insurance policies are for homes built with brick that have tiled roofs. If your home is a little more out of the ordinary, you may need a more expensive specialist policy. This might apply to particularly old or listed properties, those with thatched roofs, or houses built with more obscure materials.
Outbuildings such as sheds, summerhouse, and garages, can be tricky business. Make sure to check whether these are covered by building insurance and whether their contents are covered by your contents policy.
8) Type of Damage
The fine wording on the type of damage your items and building is covered by can be quite specific. For example, you will be covered for accidental damage like someone driving their car into your home, but the damage caused by botched maintenance can be excluded. You also are often not covered if you damage items while cleaning.
Remember to read the small print and upgrade your policy accordingly.
9) Do You Want Cover Away from Home?
If you want to protect your belongings when they’re away from your home, for example, if you go on a trip or lend an item to a friend, some policies allow you to pay extra to do so. Adding this to your policy will also mean you don’t need such a robust travel insurance policy when you go on holiday.
10) No Claims Discounts
It’s also wise to check whether your insurer offers ‘no claims discounts.’ This is when you’re given a discount on your monthly premiums if you haven’t made a claim in a certain amount of time. As the years go on, you can end up with a much cheaper policy as you’re deemed less of a risk than someone who has to keep making claims.
11) Alternative Accommodation
If you find yourself in a particularly devastating situation, e.g., your home has been destroyed by a fire or natural disaster, most insurers will provide alternative accommodation, but it’s wise to check the finer detail — do you really want to stay in a cheap hotel?
12) Do You Have Guests?
If you rent your property or rooms out through services like AirBnB, you might not be covered by the damage they cause. This is still a grey area when it comes to insurance, because although they’re technically considered guests and not part of a business, you are in essence, making money from your home.
13) Compare Prices
Remember, never rush into an agreement. There are now many price comparison sites on the internet and you should always take the time to shop around for the best deal.
Home insurance is an important yet confusing undertaking for most people, but if you make note of the above points, the process should go smoothly and you should have the coverage you need.