Home Insurance - Key Factors to Consider

Category: Home insurance
Date: 11/5/2008

Home Insurance

What is Home Insurance?

Home insurance covers your home and possessions for a range of mishaps, from those as serious as the effects of fire, flood, or subsidence to accidental damage like putting your foot through the ceiling when you're in the loft.

There are two elements to home insurance, which is also called house insurance or household insurance. These are:

• Buildings Insurance – which insures the building and any 'fixtures and fittings'; and
• Contents Insurance – which insures all of your possessions in the property.

Buildings Insurance

• Buildings insurance should cover the cost of rebuilding your house if it was to be totally destroyed. Clearly this amount is above and beyond what the average man in the street can afford, making buildings insurance a necessity for most of us. The rebuild cost will normally be less than the market value, so it's worth spending the time to work out the value that needs to be covered.

• The rebuild value will need to include things like the fitted kitchen and bedroom furniture, baths, toilets etc and anything else which is physically attached to the structure of the house. If you could pick the house up and turn it over, anything that didn't drop out is probably a fixture or fitting.

• Buildings cover also covers 'outbuildings' like garages, sheds and the granny annex.

• Third party liability should also be included. For example if a tile blows off your roof and lands on next-door's car, you wouldn't want to foot the bill for the repairs.

Contents Insurance

• Home Contents Insurance is designed to protect your belongings from theft or damage from fire, smoke, water and the like. Anything which isn't a fixture or fitting would be covered.

• You can also choose to insure items which you take away from the property, such as cameras, MP3 players and the like.

• Some modern additions to a contents insurance policy will be items like cover for your downloaded music and movies – so make sure you keep all the receipts!

Who is it suitable for?

• Buildings insurance is usually a requirement of the lender if you have a mortgage. If you don't, it's still a good idea if you own your own home as you risk losing your home if there was a major fire or flood. If you are a tenant you probably won't need buildings insurance as the landlord will normally have it.

• Contents insurance is suitable for anyone who wants to make sure they are compensated financially for the theft or damage of their possessions. The value of your possessions can run into several thousand pounds. Just add up the cost of replacing all your electrical equipment and kitchen appliances and the numbers are already getting pretty large. Add on all your CDs, DVDs, clothes, jewellery, kids' toys, furniture etc and the premiums probably start to seem like good value.

What should you look out for?

When selecting home insurance and comparing prices, you need to make sure you are comparing like with like. The main things are:

• Risks Covered - Make sure that the policies you compare cover the same risks. A cheaper premium with less cover may well be bad value.

• Level of excess – the higher the excess is (ie the amount you need to pay towards a claim), the cheaper the premiums will be. You can opt for a higher excess to reduce premiums.

• There will be a number of extra types of cover which you can opt for. When you get an insurance quote (particularly online) the insurer or comparison site will make assumptions about whether or not to include these as default. So your cheap premium may add up if you add other covers in, or an expensive one may be more attractive if remove unwanted extras. These optional extras typically include:
  • Personal Possessions Cover – this covers possessions outside your home, things like your camera, jewellery and mobile phone.
  • Accidental Damage – add this to your buildings or contents cover to protect yourself from the cost of accidents around the home.
  • Legal Protection – which can give you access to legal advice where this is related to your home or contents.

What to do next?

Take a look at our guides on Things to Watch Out For, and Key Factors to Consider when buying insurance, so you can go in knowing what you're looking for.

Compare Home Insurance Quotes [link to go to insurance landing page] now with our insurance comparison service. Moneyfacts.co.uk has also put together a range of insurance guides if you are looking around for other types of insurance.