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Home insurance explained

The most valuable possession that most of us own is our home. Its contents generally define us; from the colours chosen for our soft furnishings, the keepsakes on display that have been collected on our travels or gifted to us by loved ones and the gadgets scattered to entertain us. Whether financially expensive or of great sentimental value, it's imperative to keep your home and its contents protected.

Home insurance or house/household insurance is a way to document and safeguard the entirety of your home. It is usually made up of two separate components; buildings insurance and contents insurance. Between them, they cover a range of acts or events that could potentially damage your home inside and out; from the very structure, to the fixtures, fittings and furnishings.

These policies are put in place so that any theft or damage done to your property can be repaired or replaced and these home insurance policies are now available for all types of homeowners, tenants and landlords.

Why is Home Insurance necessary?

The ramifications of not having insurance, should something happen to your property, are frightening to say the least. Claims on home insurance are generally from unforeseen acts or events that are out of our control, such as burglary, inclement weather damage or fire. Should any of these occur and a property is not insured, the homeowner could end up losing more than just their belongings if necessary costly repairs can’t be paid for; making the risk of not taking out this insurance, one that most of us cannot afford to take.

It is essential for all mortgaged houses now to have an insurance of this kind and many mortgage providers will discuss cover with you when take out your homeowner loan, with some lenders making buildings insurance especially, a compulsory factor of their loan agreement. With rental properties, the buildings insurance may be covered by your landlord but the protection of the buildings contents will be down to the dweller.

What's included in your home insurance?

Dependent on whether it is buildings or contents insurance, policies will usually cover the following:

Buildings insurance should cover all the structural fixed aspects of your home, such as:

• House structure – walls, roof and ceilings
• Boundaries - footpaths, fences, gates and hedges
• Permanent fixtures – kitchen, bathroom and fitted furniture
• Decoration – wallpaper and pain
• Cables and pipes

There are a variety of building insurance policies to suit different types of property and checking what is excluded is as important as what is covered by each policy. Typical standard policies will generally cover the main threats of:

• Fire and/or explosion
• Floods and/or water escapement from tanks or pipes

Contents insurance should cover all the valuables within the walls of your property (that are not fixed items) against damage or theft, such as:

• Jewellery
• Furniture
• Appliances
• Clothing

Some contents insurance may even cover the contents of your fridge/freezer up to the value of £500.

Cheaper policies will ensure that many items will be covered as standard, such as DVD players, TV’s and audio equipment, on a like for like basis. Other items within your home may singularly be of great value, such as jewelery, and may need to specifically be listed on your policy or may need specialist cover, which may increase the price of your annual premium.

Property Advice Blog takes a more detailed look into both these policies in ‘standard home insurance policy types’.

What's involved?

Choosing home insurance policies for the first time can be daunting and it’s worth speaking to an insurance adviser regarding the options for your specific type of property. The following are worth investigating:

Home Insurance Brokers

Brokers have the technical expertise to know what cover will be needed and also know what products are available in the market to meet those needs. However, ask the question if your Broker is ‘whole of the market’ as they may only contact insurers they have deals with.

For a list of Home Insurance Brokers, see the British Insurance Brokers’ Association (BIBA) website: http://www.biba.org.uk/BrokerHome.aspx

Direct Insurers

Known also as Direct Writers, this route dispels the need for a Broker and their commission charges. However, Direct Insurers may pass on costs from marketing.

Supermarket chains

Many large UK traders, including supermarkets or retail chains, may offer cost effective options with the added incentives of bonus schemes, such as Nectar or ClubCard points for every pound spent on your insurance. However, these big brands only deal direct with limited insurers, restricting your overall choice.

Banks and Building Societies

Many banks or building societies may give you money off deals if you already have accounts with them or currently hold another insurance policy with them, such as car or life insurance.  However, as they only deal direct with a small selection of insurers, you may be limited in your overall choice of provider.

Price comparison sites

When searching for home insurance deals, there is plenty of advice to be found online. Price comparison sites allow you to enter your details once and receive quotes from a wide range of providers which include Direct Insurers, Brokers, Insurers and the large UK traders. They can help you establish an overview of the market and break down elements of cover, contrasting what’s included in the different policies available and tailoring aspects to your needs and budget.

Most insurers will offer contents and building as a combined policy now, but it is possible to buy them separately. Just be mindful, that should you need to claim, having two separate policies may make the process more difficult.

Information needed

Insurers also ask for a wealth of information to ascertain your annual premium. This can include your location with its theft or flood risks, your personal security to protect your property and your type of property, as some providers would insist on specialist insurance for more unusual properties such as thatched cottages. They also now require more personal information to assess your level of individual risk, such as ‘are you a smoker?’

Renewal

If you already have buildings and contents insurance, then your current provider will send you an annual renewal notice, which will notify you of any changes to the policy and your expected annual premium. Most will have a system in place that if you do nothing, the policy will automatically renew making it easier on the policyholder, so of course the majority end up staying with the same provider for years. However, it is always worth shopping around for the best premium and cover to specifically suit your property and needs, as policies and offers are consistently changing.