Home and Contents Insurance

If your home burned down or you suffered another catastrophe, could you afford to rebuild it and replace all your possessions? For most of us the answer is, of course, no, which is why just about everyone needs house insurance.

House buildings insurance covers the property itself, while house contents insurance covers your possessions. Although the policies are sometimes sold together, it is possible to buy them separately, and often preferable to do so, to be sure of getting the best cover at the best price.

How much will I have to pay?

Most companies base the premiums they charge on a combination of factors, including: the value of the house and its contents, your postcode (people living in inner-city areas tend to get charged more because insurers believe there is a higher risk of burglary), the type of house you live in (homes of unusual construction such as thatched cottages are more expensive) and your claims history.

What can I insure myself for?

A basic policy will cover you for a series of specified risks. These are usually fairly standard and include things like storm, fire, lightning, explosion, subsidence, thieves and vandals. With buildings policies, it is advisable to make sure that the policy covers frost damage to pipes and accidental damage to underground pipes and cables.

Check that your policy covers your legal liability as the owner of the property. If a visitor trips and is injured you could be sued. Legal liability insurance, which is usually up to a maximum of £1 million, covers such eventualities. It is also worth looking out for a policy that covers replacement keys and locks if yours are lost or stolen.

Exclusions on policies

Most policies have lists of exclusions, which also tend to be fairly standard. They include damage caused because your house has not been kept in a good state of repair, the costs of routine wear and tear, damage that you have deliberately caused yourself, smoke damage or damage caused by pets.

A standard house contents policy will not cover your belongings outside the home, but it is usually possible to buy an extension to your policy if you have jewellery, say, or a lap-top computer that you take outside the home. Most house contents policies put limits on the amount that can be claimed for specified valuable items, such as electrical goods, jewellery and works of art. There is often a single-item limit of £1,000 or so and an overall limit of £10,000 for all your valuables. Some policies allow you to increase these limits in return for higher premiums.

Some cover may be excluded if you are away from your home for a period of more than 30/60 consecutive days. Accidental damage and all-risks policies give wider cover, but are considerably more expensive. They will pay out if, for example, you put your foot through the ceiling or spill wine on your carpet, where a standard policy usually will not. An all-risks extension may also cover your possessions if you take them outside the home.

Do all policies provide "New for Old" cover

Most contents policies these days include new for old cover although this may not apply to all of your household goods. Quite often a deduction is made for wear and tear on items such as clothing and linen and pedal cycles. Some insurers may offer indemnity cover whereby your sum Insured is calculated allowing for wear and tear and claims are settled on the same basis. New-for-old cover is precisely what it says: if your belongings are stolen or damaged beyond repair, the policy will pay for the cost of a brand new replacement.

Insurers may now replace items themselves, as an anti-fraud measure and because they can get discounts for bulk buying, rather than give you the cash.

Sum-insured or bedroom-rated policy?

With buildings and contents insurance you will be faced with a choice between sum-insured and bedroom-rated policies. This is essentially a decision between cost and convenience.

With a bedroom-rated policy your premiums are based on the number of bedrooms in your house. On a sum-insured policy you will face the daunting and time-consuming task of calculating the value of your home and its contents yourself. If you overestimate their value, you will pay too much in premiums: if you underestimate, any claims you make could be scaled down by the proportion by which you are under-insured.

You do not need to worry about under-insurance with a bedroom-rated policy, but you may well be paying extra for cover that you do not need. However, some bedroom rated policies may not provide any cover if your contents exceed the sum insured at the time of loss or if you have changed the number of bedrooms without letting your Insurer know.

Excesses on policies

Most insurers require you to pay the first £50/£100 or so of every claim yourself. This is called a "compulsory excess". You may also be given the option of various voluntary excesses and in return for your agreeing to pay the first part of certain types of claim, the insurer will reduce your premiums.

Another way to cut the cost is by avoiding claiming. No-claims discounts, long a feature of car insurance, are becoming commonplace on house policies too and it is possible to save considerable sums this way.

Some insurers also offer loyalty discounts for people who stay with them for several years. The cost of cover varies dramatically from one company to another and we at John Lane (Insurance Consultants) Ltd market the risk on your behalf to find the best policy for your requirements. This task is made easier by using our computerised quotation system which searches a substantial section of the market for the most suited product.