Last updated on 8 February 2016
Why you need home insurance
If you own or rent a property it’s a good idea to have home insurance to cover your personal belongings. If you own your own home then you will also probably need buildings insurance to cover the cost of rebuilding or repairing your home in the event of fire or other damage.
Home insurance is not a legal requirement and as a result a large number of people don't have any insurance at all or don't have the right amount or type of cover.
Buildings insurance covers the cost of rebuilding or repairing your property if it's damaged or destroyed by events such as fire, storm or subsidence. When you buy buildings insurance it's not the market value of the property but the rebuilding cost that is important. The cost of rebuilding a property doesn't include the cost of buying the land so it's normally less than the market value of a property.
The Building Cost Information Service from the Royal Institution of Chartered Surveyors has a calculator you can use to work out the rebuilding cost of your home.
Contents insurance covers the cost of replacing your belongings if they are lost or damaged as a result of events such as theft, fire or water damage. Most contents insurance policies give new-for-old cover, which means that most damaged or lost items will be replaced with new ones or you’ll receive a cash sum to replace them. With a wear-and-tear policy the amount you receive is based on the value of your belongings at the time they were damaged or lost. This could be considerably less than the cost of replacing them.
Sum-insured and bedroom-rated policies
Home insurers use two different methods to decide how much contents cover you can have and how much to charge you. With a sum-insured house insurance policy you specify the amount of cover you need and the insurer decides how much you should pay. With a bedroom-rated policy, the insurer bases the amount of cover you need and how much this will cost on the number of bedrooms in your property. Bedroom-rated policies typically provide between £40,000 and £50,000 of cover as standard. This means you don't have to calculate how much your belongings are worth. However, whichever type of insurance you choose it makes sense to make a list of all your belongings (with photographs of your valuables) in case you need to make a claim.
You can usually add accidental damage cover to buildings and contents insurance for an additional premium. This cover means you can claim on your insurance if you accidentally damage your home or belongings. It can be an expensive option and many policies include some accidental damage cover as standard such as for TVs, computers and glass in furniture.
Personal possessions cover, also called ‘all risks’, is another optional extra with contents insurance policies and covers your belongings away from home against loss or theft. This extra can be expensive. With personal possessions you choose the total amount of cover you need and there is normally a maximum you can claim for each item.
If you opt for personal possessions cover you could save some money on your travel insurance by removing personal possessions cover from your travel insurance policy. However, if you claim on your house insurance for lost or damaged baggage you could pay more for your house insurance as you will lose some or all of your no claims discount.
Shopping around for home insurance
You may be able to save money shopping around for home insurance but getting the right cover is more important than just buying the cheapest policy you can find.
Comparison sites are a good place to compare policies quickly. These sites don't include every insurer so you may want to check those not included. Also, watch out for excesses being increased to give a lower premium.
An insurance broker can also help you find the right cover. You can find a broker through the British Insurance Brokers Association's website or by calling 0370-950 1790 (you'll have to pay for this call).
Top tips for buying home insurance
- Shop around for the best deal on your home insurance but remember that getting the right cover is more important than just buying the cheapest policy.
- Make sure you have the right amount of insurance for your home (particularly if you have expensive items you want covered) and check what’s covered and what's excluded.
- Check excesses on policies as these vary.
- With buildings insurance it's the rebuilding costs and not the market value of your home that’s important.
- If you buy house insurance through a cashback site you could get up to around £75 cashback.
- You will pay less for insurance if you haven't made a claim in the last few years.