Home insurance is a specific class of insurance that offers financial protection against loss or damage caused to your building, its contents and, very often, your personal possessions - as well as protecting you against any financial liability arising from accidents in the home.

This insurance is vital to protect you against the financial consequences of fire, theft, storm damage, flooding etc. Home insurance typically breaks down into the following areas:

Buildings insurance - covering damage to the structure of your building and property,

Contents insurance - covering loss or damage to the contents of your home,

Accidental Damage - an extra level of cover applicable to both Buildings and Contents insurance that covers accidental damage caused by you and your family,

'All Risks' - a further level of protection to cover your personal effects whilst you are using them or transporting them outside of your home.

And, of course, there are a number of different options to choose from depending upon whether you are a property owner or tenant, whether your property is a house or a flat and the value of your possessions.

Home Insurance: Buildings

Top

If you own a house, as opposed to a flat, then you will need buildings insurance to protect yourself against financial loss caused by damage to the actual structure of your home and property.

Buildings insurance can be either bought on its own, or alongside contents insurance as part of a larger policy. Buildings insurance will typically protect you against:

Fire, explosion, storm, lightning, water leakage etc.

Theft - loss or damage caused by a burglar, but not if that burglar is a tenant with a key to your front door! It might sound obvious, but this means that property investors and buy-to-let landlords will need to look for specialist cover for rented properties.

Subsidence - movement of the ground beneath your building's foundations, causing the appearance of diagonal cracks in the walls around doors and windows. This is usually covered, but is subject to a standard £1,000 excess and other limitations.

Flooding - usually covered by the standard policy, but worth checking as some areas with a history of flooding are now excluded.

If you are buying a property with a mortgage, it is very often a condition that you have suitable home insurance in place. You may also be obliged to take out the policy with the mortgage company - but thankfully this expensive option is becoming a thing of the past..

Home Insurance: Contents

Top

Regardless of whether you own your home or rent it as a tenant, you will always need contents insurance to protect your possessions against loss or damage caused by fire, theft, storm, lightning and flood.

'Indemnity' vs 'New for Old' - an 'indemnity' policy will reimburse you for the current value of your damaged goods - i.e. a 5 year old television is worth just a fraction of the value that it was worth when new. On the other hand, a 'new for old' policy allows you to replace a damaged item with a new one, regardless of its age and condition.

Accidental Damage - covers damage to your possessions caused by your own mistake or carelessness. Some insurers will include 'AD' as standard, whilst others will charge an additional premium.

All Risks - additional cover for your personal possessions, such as clothing, handbags, credit cards, etc., lost or damaged whilst you are travelling anywhere in the UK or overseas.

Other options - different insurers offer a wide range of extra covers - some free and some requiring an additional premium - including garden furniture cover, replacement locks, credit card fraud, annual travel insurance and networks of approved tradesmen to save you the hassle of having to find your own builders.

And whilst you may not think that you have much of any value to insure, just consider the damage caused by a small fire on your cooker - and the cost of putting it right. New cooker? A couple of replacement kitchen units? Smoke damaged furnishings? Redecoration? Even a small accident can prove expensive!

Home Insurance Premiums

Top

When you are looking for a home insurance policy, the premium that you will be quoted will be based on your own personal 'risk profile' and the likelihood of you having to make a claim within the next year.

Every insurance company will employ its own team of underwriters to assess this 'risk' and each will use a different set of guidelines as the basis for your quote. And for precisely this reason, you should speak to a number of different insurers to find the one that looks most favourably on your own particular circumstances.

Your home. What is it made of? Wooden or thatched houses are more likely to burn. Equally, flats above fast food outlets are considered higher risk. Security? Good locks and approved alarms will reduce your risk of burglary. Postcode? This affects the risk of flooding, subsidence and burglary.

Your personal situation. Age? Gender? Marital status? Occupation? All of these factors will affect your premium. Yes, a single journalist is considered a higher risk than a married bank clerk.

The level of cover. Obviously you will pay a higher premium to insure a more expensive property and possessions. But you will also have to pay extra if you opt for 'new for old' cover, 'accidental damage' or 'all risks' insurance.

No claims bonus. Some insurers will offer a discount for every year that you have managed to keep a 'clean slate' and not made a claim. Check with the insurer to see if this applies.

Excesses. Whenever you make a claim you will have to pay the 'excess' on that claim - i.e. the first £50 or £100 of the value of the claim. Most insurers will also offer you a discount on your annual premium if you agree to pay a higher excess each time you make a claim - the higher the excess, the greater the discount.

Bear in mind that whenever you make a claim, you will have to pay the first excess and your future premiums will also increase - so try to avoid making too many claims and don't expect to make a profit out of your insurer!

How to Choose Home Insurance

Top

Most of us fall into what the insurers would call a 'standard risk' bracket. We live in houses made of brick & tile, usually alongside thousands of identical properties in one of the UK's big cities, and most of us have fairly standard jobs.

So most of us would be equally happy with any of a dozen fairly standard insurance policies - all offering similar options and benefits. So how do we choose from one insurer or the next?

Price - the single most important factor in a homogenised market: Choose the level of cover that you would be happy with (value of your possessions? new for old cover? accidental damage?) and the 'excess' that you can afford in the event of a claim - and then look for the cheapest quote!

Optional extras - do you have any special circumstances that you need to cover with your insurance? You work from home? Your house has a thatched roof? You've converted your garden into a Koi Carp tropical paradise? Not all insurers will give the same cover so check the detail and carefully consider the trade-off between coverage and premiums.

Claims Handling - who carries out the repairs, you or your insurer? Many insurers offer their own claims handlers and repairmen; others leave it to the claimant to find the appropriate tradesmen and reimburse you afterwards. The first option may save time and effort - but not all companies offer it.

As always, you are strongly advised to compare your options thoroughly and to check the small print before making a decision.

Home Insurance: Buy to Let

Top

Standard home insurance policies include a number of restrictions that prevent them from being used by landlords for rented property. And an insurer is unlikely to pay out any claim if it finds that the property is rented to tenants.

The landlord also has special needs relating to security, liability insurance (in the event of an accident in the home) and the provision of alternative accommodation if the property gets damaged.

So the landlord needs a specialised policy that will cover his own unique set of risks - hence Landlord Insurance! Landlord insurance can be broadly divided into the following sections:

Buildings insurance - similar to a standard policy but also likely to cover 'damage by a tenant' and 'loss of rent' in the event of the building being otherwise damaged.

Contents insurance - again similar to a standard policy, but allowing for the security issue of the tenants having access to your property. Landlords' contents insurance will also provide 'property owners liability', options for furnished & unfurnished lettings, loss of rent and protection against damage caused by the tenants.
Rent protection - a specialised option to protect your monthly revenue from rent in the event of a tenant defaulting but refusing to vacate the property.

Legal protection - insurance to provide for the legal costs of evicting defaulting tenants or squatters or to protect against legal actions brought by your tenants.

Tenant assessment and emergency assistance - Another point to look out for is that you will often require solid tenant references in order to benefit from this insurance - and your insurer may ask to see evidence of these reference checks.

Email to a friend