Insurance is a fact of daily life; whether at home, in the car, in the workplace or on holiday, we are all covered by various types of insurance.
This form of insurance covers the structure of the house such as:
Walls, ceilings and the roof.
Permanent fixtures and fittings within the building.
Decoration within the building.
Gates, fences and footpaths that all lie within the boundaries of your property.
Pipes and cables.
This covers the contents you would take if you moved, which may include:
Household goods such as cookers and fridges.
Furniture and furnishings such as tables, chairs and carpets.
Valuables such as technology and works of art.
Personal belongings such as clothes and shoes.
Contents policies may include some cover for replacement of keys and locks, contents of outbuildings, money, loss of metered water, cost of alternative premises, replacement glass, television aerials and satellite dishes.
Neither of these types of insurance are legal requirements, but if you have a mortgage your lender will insist you take out buildings insurance. However it is strongly recommended that both insurances are taken out to fully protect you against loss or damage to your property.
What is covered?
Standard policies will usually cover loss or damage due to:
Fire, aircraft, lightning, explosion or earthquake.
Theft (or attempted theft).
Riots or vandalism.
Storms or flooding.
Subsidence, heave and landslip.
Impact (eg. a car crash).
Escaped or leaking water or oil.
Optional extras (some policies may include these as standard)
Accidental damage. Under buildings insurance this would cover damage to the property, eg. hitting a pipe when knocking a nail in the wall. Under contents insurance this would cover damage to the contents of the building, eg. breakage of furniture.
Personal Possessions cover. Under contents insurance this covers your possessions away from home, including temporary cover abroad for items such as iPads, cameras and the like
Emergency. This will provide you with a tradesman that you can call out on a 24 hour basis for emergency work such as a burst pipe. A cost limit on call-out charge, materials and labour will apply.
Legal expenses. This will provide cover for the cost of legal proceedings if you need to bring action or defend a claim in respect of personal injury, consumer or property disputes, as well as for any award of the other party’s legal costs.
How much will it cost?
The cost of household insurance can vary enormously – an insurance broker who knows the market will be able to select the best policy for you depending on your circumstances. Here are some of the factors that will influence the premium you pay:
The area you live in. Insurers use postcodes to determine the risk of an area in terms of crime and flooding risk for example.
The age of the building.
Structure of the building, especially if it is timber framed, has a thatched or flat roof, if it is listed or situated in a conservation area
Policy cover. Not all policies are the same and cover and therefore cost will vary.
How can the cost be reduced?
There are ways you can bring down the cost of the insurance premiums you pay, depending on what you require from the insurance. These might include:
Policy excess. This is the amount you have to pay up-front in the event of a claim. If you agree to pay a higher excess in the event of a claim your premium will be lower.
Security. If the building is protected by an approved alarm and is well secured by approved door and window locks most insurers will give a discounted premium.
Neighbourhood Watch. In a neighbourhood watch area most insurers will give a discounted premium.
No claims. If you have not suffered any claims in the last few years you will usually qualify for a discounted premium.
Combined cover. Most insurers will offer a discount if you insure both buildings and contents with them.
Sum insured. Often subject to a maximum, a sum insured policy is rated on the sum insured you specify.
How do I calculate the sum insured?
For buildings insurance this can be done either on a room rated basis (subject to maximum amounts of cover) or on a sum insured basis. In regard to the sum insured basis you will need to work out the rebuilding cost of your property. Note this is not the market value but the cost of totally rebuilding the property which should also include costs for demolition, clearance of the site and builders and architects fees. The Association of British Insurers has an online calculator to assist with this (see Resources).
Contents insurance can also be done either on a room rated basis (subject to maximum amounts of cover) or on a sum insured basis. In regard to the sum insured basis you work out how much cover you need. It is essential that you correctly insure all the contents within the property. The easiest way to do this is to make a list of all the items, room by room and make a note of how much each item would cost to replace as new (some policies will deduct wear and tear).
Most policies will include index linking which means that an inflationary amount will be added each year but you should update your insurance regularly to ensure that you are not under-insured.
What if I have to make a claim?
If in the unfortunate event you have to make a claim on your policy, taking the following steps will assist in you getting your claim settled speedily and in full:
Keep receipts for anything of significant value as this will act as a valuation and also as proof of purchase.
Take and keep photographs of valuable items.
Record any serial/model numbers.
Keep a note of how old items are as this may have a bearing on replacements you get.
Keep your insurance documents in a safe place and know where they are.
Always read through your documentation thoroughly to ensure you are covered for everything you believe you are and contact your broker about anything you do not understand.
Check regularly that your insurance is up-to-date.
Keep a note of the contact details of your broker/insurer handy. Remember you may need to leave in case of emergency.
You should notify your broker, if you have one, as soon as is practically possible if you believe you need to make a claim. If you deal directly with the insurer then you would need to contact them.
Where do I go for advice?
There are a huge amount of policies on the market for household insurance and the cost and cover provided can vary widely. It is always best to talk to an insurance broker.
As an independent expert who
knows the market, they will help you decide what kind of cover you need, and choose the right insurer to meet your requirements at the most reasonable cost.
An insurance broker will put your interests first. They work for you, not the insurance company. You can therefore be sure of impartial advice at all times, a choice of products, and a helping hand. The British Insurance Brokers’ Association (BIBA) is the largest trade association for insurance brokers. All BIBA members offer the highest professional standards and financial integrity, and always place the interests of their clients first and are regulated by the Financial Conduct Authority. BIBA members can be found nationwide, so there is bound to be one near you.
The Association of British Insurers
The British Insurance Brokers’ Association