Homes are a private, safe and happy place that house memories and special moments as well as your personal belongings. They are seen as a place of comfort and somewhere you and your possessions should be safe and secure. Unfortunately, despite preventative measures, people’s houses can sometimes become the subject of crimes, fires and natural disasters and although you can do as much as you can to stop it, the reality is that it still happens.
Even if you have the correct measures in place, there is nothing you can really do to prevent bad things happening to your home.
It’s not the nicest thought, but realising this before it’s too late can help you prepare for the worst and home insurance is the most important preventative measure you can have – it may not stop someone from breaking in or it may not prevent a fire from spreading, but it protects your home and the contents of it during these unfortunate events.
The Three Main Types of Home Insurance:
Depending on whether you rent or own your home, you might need more or less cover. One thing is for sure, everyone should invest in home insurance as in the unlikely event something does happen, you will be covered.
Contents insurance covers the cost of replacing your items should they become stolen, damaged or destroyed.
Types of contents insurance
How do you know how much cover to get? Well, insurers will probably offer three main policies that calculate the amount of cover you get in different ways:
Bedroom rated – where the number of contents cover you get is based on how many bedrooms you have in your house. A lot of people opt for this options because you don’t have to work out how much the contents of your home is worth individually.
Sum insured – You personally work out how much the contents of your home is worth and therefore, how much cover you will need. This can be quite arduous, but there are dedicated websites that calculate the value of the contents you input and it does mean you will only be paying for the cover you need.
Unlimited sum insured – All of the contents of your home are covered fully and there is no limit to how much is covered. People opt for this option because there is no risk of being underinsured if something is to happen.
Some insurers will have a cap on the value of a single item they can insure, something that is known as a single article limit. Most insurers have a single article limit of £1,500, so if you have anything that is worth more than the insurer covers, you will have to inform them and get additional cover.
If you make a claim
If you have to make a claim with your provider, they will settle the claim on a ‘new for old’ or ‘indemnity’ basis.
New for old – if your insured item is stolen, damaged or destroyed, your provider will pay for a brand new replacement of the same value.
Indemnity – will take into account the current worth of the item based on any wear and tear, which can significantly reduce the payout you get.
As you would imagine, payouts on ‘new for old’ policies tend to be a lot higher, because they are paying for brand new replacements, no matter the condition of the old one. Therefore, premiums on ‘new for old’ policies will be a lot higher than those on an ‘indemnity’ policy.
Covers the cost of repairing any damage to the structure of your home, such as the walls, windows and permanent fixtures and fittings.
Home insurance doesn’t just involve the contents that are in it, there are some incidents that will also cause damage to the structure of your home, the ‘outer shell’ if you like. It’s important that all homeowners invest in home insurance and if you have a mortgage, bear in mind that home insurance is usually required as a condition of the loan.
You will be able to claim with buildings insurance if your house has been subject to the likes of:
- Damage from vehicles
- Flooding (water damage)
There Are Two Types of Buildings Insurance An Insurer is Most Likely to Offer:
Bedroom rated: the provider will estimate the price of rebuilding your home from the ground up based on the number of bedrooms in your house. This policy is the most popular among homeowners, as all the calculations are done for you and the policy provides a high sum insured to prevent you from being underinsured.
Sum insured: you will calculate the cost of rebuilding your home should it become damaged (the sum insured is the cost of rebuilding your home from scratch including any professional fees). Naturally, the cost of rebuilding your home will increase over the years, so it’s important you have an index-linked policy that will update the sum insured on the changing price of your home rebuild.
What’s The Best Option to Go For?
Deciding between the two types of building insurance comes down to your preference between cost or convenience.
Bedroom rated cover is a lot more convenient and hassle-free, as most of the work is done by the provider. However, this means your premiums will be a lot higher than a sum insured policy. The downfall of a sum insured policy is that it’s difficult to calculate, however, you can be sure you are only paying for the exact cover you need.
Combined Building and Contents Insurance
As you would expect, this type of policy combines both types of home insurance into one big policy, which means your home will be fully covered in the event of a claim. The combined option of home insurance is only available to people who own the freehold of their home, so it won’t be suitable for people who rent or just own the lease of their property.