Buying a property is probably the biggest single investment any of us ever make, so it is important to make sure you have the right protection in place to protect it. OK, the property may have great security when it comes to alarms and locks but those will not protect it from fire or flood. And that’s where insurance comes in.
To help guide you through the maze of terms and understand what insurance cover you really need and useful extras to consider, we’ve put together a brief – and hopefully easy to understand – walk through of the essentials.
At a glance
Buildings insurance covers the actual structure of your home – so the walls, the roof, the windows, the flooring, service pipes and, if a house, any outbuildings like a shed or garage. It also includes the permanent fixtures such as the kitchen cupboards and bathroom suite.
If, like most of us, you’ve taken out a mortgage to buy your home, your lender will require you to buy this type of insurance to protect their investment and will demand to see proof of cover. If you are buying a flat or new home that is a leasehold property, the building should be insured by the owner of the freehold, so it is not your responsibility. HOWEVER, your lender will still want to see proof that buildings insurance is in place and you will be contributing to the owner’s premium normally through your monthly or annual service charge.
Contents insurance covers your belongings – so everything you take with you when you move home, from the furniture to pots and pans, to pictures, to gadgets, to jewellery and clothes. There is a saying that goes, if you tip your house upside down, whatever falls out makes up the contents you need to protect. This is not compulsory but the total value of everything you own might surprise you. The question you need to ask yourself is that if you lose some or all your belongings in, say, a fire, could you afford to replace them yourself? Few of us could!
You can choose to buy your buildings insurance from one insurer and your contents insurance from another, but most people buy a combined buildings and contents policy. It is usually better value, and it is far simpler to deal with one insurer if you do have to make a claim.
So that is the basics covered. Let us get into the nitty-gritty of each of these different covers.
The nitty gritty of Buildings Insurance
Buildings insurance is all about covering the cost of repairing or rebuilding your home if it is damaged by events such as fire, flooding, storms, frozen or burst pipes, subsidence, theft and vandalism. As you would expect, there are a few exclusions. Buildings insurance will not normally pay out for damage due to wear and tear or acts of war or terrorism.
When it comes to finding the right insurance, there are a few important things to think about:
The most important thing is to insure yourself for the right amount that it would take to completely rebuild your home. This is not the same as what you paid for it or the current market value. Rebuild costs are typically less. As few of us are qualified building surveyors, the Association of British Insurers (ABI) has an online calculator on its website. It is important to work out an accurate cost as if you insure your home for too much, you could end up paying over the odds. And if you go too low, you could find yourself facing a big bill to top up any rebuild should the worst happen.
Some insurers offer unlimited cover so you don’t have to worry about this and others work it out themselves based on the huge amount of data they have built up over the years, but it’s useful to know to help you shop around and find the right cover for your exact needs.
Non-standard properties Insurers are creatures of habit. They like things to be normal and putting square pegs in square holes. Most homes in the UK are built from bricks and have tiled or slate roofs, and blocks of flats are built to strict standards that insurers understand. If, however, your dream home has a thatched roof or is a new eco-build or an old listed property, it’s likely that you’ll have to source buildings insurance from a specialist rather than one of the high-street names and the premium you pay may be higher reflecting the fact that any rebuild would be more complicated.
What is deemed nonstandard?
“A non-standard construction house is built from materials that do not conform to the ‘standard’ definition. Standard houses have brick or stone walls with a roof made of slate or tile. A non-standard construction is therefore anything that falls outside of this.”
The small print
Insurance is a contract between the homeowner and the insurer, and just as with any contract there is always small print. Here are a few key things to look out for:
Trace and access cover
Ensuring that trace and access is included in your building’s insurance could be invaluable if you need to find and repair a leaking gas or water pipe. Pipes are often hidden away in hard to access places, so without this element of cover, you could find yourself having to fork out for what can be both a disruptive and expensive process. Nine times out of ten, this cover is included as standard in buildings insurance policies but do check.
Accidents do happen – but if you do not have cover for accidental damage to the property then any claim resulting from, say, breaking the glass of an expensive patio door, could be turned down. Some buildings insurance policies offer this as standard; others will charge an additional premium. It is worth considering and given the most common accidental damage claims involve dogs and children, if you have either of them it is probably a no-brainer!
Despite the myth, insurers are not a bad bunch. They know you will want to get away for weekends to visit friends and family, take holidays or you may have to work away from home or even spend a period in hospital. Most policies allow your home to be unoccupied for a period of 30-days. Any longer, then they get nervous – and with good reason. The longer a home is unoccupied, the more of a target it is for burglars or, during winter, there is a bigger risk of frozen pipes or leaks going undetected.
If you know that you are regularly away for longer periods, you will need to be upfront with your insurer who may charge an additional premium.
The nitty gritty of Contents Insurance
Contents insurance covers the cost of replacing your personal belongings against loss or damage caused by theft, fire, storms and the like – very similar to buildings insurance.
And just like buildings insurance, it is important to get the total sum insured right. This is harder than you might think and does require a bit more effort than simply going on to the ABI’s website. The most effective way to do it is to go round room by room – or visualise it if you have not moved yet! – and make an inventory of the possessions you have in each one.
If you have or will have a shed or garage, you will need to think about the value of the tools or gardening equipment or outdoor furniture and BBQs or sports equipment that you’ll be storing in them.
Do not Forget
Do not forget the carpets, curtains or blinds and light fittings – these are not considered permanent fixtures so are not covered by buildings insurance.
The small print
Just as with buildings insurance, you will need to think about whether you want cover against damage caused by accident. So – are you going to be doing any decorating? It is incredibly easy to drop a pot of paint on a carpet or wood floor. And there is the question of pets and children again. If accidental damage is not offered as standard, think long and hard about paying the additional sum to protect your precious belongings from the unexpected!
Cover away from home
If you regularly take valuable items out of the home, then you may want to ensure that “outside the home” cover is included. Mobile phones, tablets, laptops, bicycles ... there is a wide and varied range of possessions that we use away from home daily, so it is a valuable additional element of cover to consider.
High risk / high value items
If you own a designer handbag, valuable jewellery or artwork, even something like a top of the range road bike, it is likely that these valuables will not be covered under the basic terms of your content’s insurance. Most contents policies limit the amount you can claim for any one item – known as the single item limit – usually in the region of £1500 to £2500. If you have an item worth more than this, then you will need to list it separately. You may have to provide proof of value and it is worth taking photos of these items as well as keeping receipts to back up any claim should it come to it.
New for old
Contents insurance will either pay for replacement of lost or damaged items on a “new for old” basis – so it will pay for a brand new TV even if the one that was stolen was a few years old – or it will pay at the market value of your stuff. This can be a lot lower, so it is worth thinking about what offers the best cover for your possessions.