Understanding home insurance
What is home insurance?
Home insurance is an umbrella term that covers two different types of insurance: buildings and contents. You can get building and contents insurance separately, or you can get one home insurance policy to take care of both.
Buildings insurance protects the structure of your home. So if lightning strikes your roof, your buildings insurance would cover the repair costs. Fitted furniture may also be covered by buildings insurance (check the details of your policy to find out).
Contents insurance is your stuff – the things you’d take with you if you moved. If you took the roof off your house, turned it upside down and shook it, the things that fell out would be your contents.
Contents insurance: bedroom-rated or sum-insured?
There are three main types of contents insurance: bedroom-rated, sum insured and unlimited sum insured. If you have bedroom-rated contents insurance, your premium (the amount you have to pay for the insurance) is worked out based on the number of bedrooms you have in your property. It’s designed to be a more convenient way of taking out contents insurance.
The good thing about bedroom-rated insurance is you don’t have to work out how much insurance you need. But this also means that your level of cover isn’t tailored to your particular needs. It's more of a rough estimate.
An “unlimited sum insured” policy covers you no matter what, so you’ll never find yourself underinsured. But you might end up paying a higher premium than you would with a more tailored policy.
The third type of home insurance is called a sum insurance policy, which covers you based on the value of the things you own. It’s a bit more effort to work out a sum insured home insurance policy, but it means your policy will be tailored to your specific needs.
The best way to avoid over- or underinsuring your belongings is to take out an accurate sum insured policy.
“Indemnity” and “Old for New”: How much money can I expect?
The amount of money you get from your insurer depends on the type of policy you have in place – “old for new” or “indemnity”.
Old for new means that you will get the amount of money it would cost you to buy a brand new version of the item. For example, if you have a laptop that’s five years old, and something happens to that laptop, a new-for-old policy would give you enough money to buy it again.
If you have an indemnity policy, you will be paid what the item is worth now - not what it was worth when it was new. Indemnity policies usually come with lower premiums.
What is buildings insurance?
Most buildings insurance policies cover the main structure of your home and any permanent fixtures and fittings. This includes bathroom fittings - such as fitted baths and showers - and kitchen fittings, including surfaces and basins. It also covers areas outside your home, such as garages or out-buildings, boundary walls, gates or drives and paths. Anything that sits on your property.
Don’t forget to update your policy at least once a year, especially if you’ve made major changes to your property. Things like adding a conservatory or building an extension can have a big effect on your policy.
If you plan to go away for a long time, usually over 30 days, you might not be covered for certain types of damage such as vandalism, thefts or leaks. Speak to your insurer if you plan to be away from home for more than a month.
Most insurers insurers will allow you to add extra features to your home insurance policy. You'll usually have to pay a higher premium if you want optional extras. Common extras include:
Accidental damage – Different levels of cover are available to protect your home and possessions against accidents around the home.
Personal belongings – This covers items you normally carry with you away from the home, such as a mobile phone, purse or wallet, and jewellery, anywhere in the world.
Matching items – If you have items that are part of a set, and one of those items is damaged or stolen, a "matching items" policy covers the items in the set that didn't get damaged. So if you lost one earring, your insurer would pay for both to be replaced.
Legal expenses – This provides cover for legal matters such as neighbour disputes, personal injury or employment disputes.
Home emergency - This covers you against emergency situations in your home, including the failure of essential services like heating or hot water.
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Limitations and exclusions apply. You should read your Policy terms and conditions carefully to ensure that you have the right level of cover. If you are in any doubt you should contact your insurance provider to discuss.