Home Insurance

Okay, so you’ve managed to get your foot on the property ladder - you may have even moved up several rungs - and filled your home with lovely things you adore. So it’s perhaps judicious to insure not only the bricks and mortar, but also its contents.

Home insurance breaks down into two distinct types: buildings insurance and contents insurance.

You can buy a single policy that covers you for both, but it’s best to treat them as two separate policies: the cheapest insurer on the house might not be the cheapest for the contents.

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Buildings insurance

This is often a condition of the lender giving you a mortgage so, in the event of a disaster, it can be repaired or rebuilt. If you don’t have buildings insurance and your house burns down the lender will have no security for its loan; in which case, not only will you be homeless, but you’ll still owe the lender the value of the mortgage.

The lender will ask you to cover the property for the rebuild cost. This could be given in the survey and in most areas of the country, may be less than the market value of the property.

As a matter of course, most buildings insurance policies cover the fabric of the building, including built-in kitchen units and bathroom suites, outbuildings, including sheds and garages, and any walls, gates or fences.

These tend to be covered against damage or destruction caused by fire, storms, theft, vandalism, escaped water, flooding and subsidence.

Accidental damages

This is the element that covers damage caused by, for example, drilling through a pipe. So if you plan to do any DIY on the property, it's well worth considering. The cost of adding on this type of cover will vary, as will the cost of the basic policy, as insurers base their premium calculations on a number of factors.

The main factors are the age of the property, postcode, age of policyholder, number of bedrooms and type of property. Generally, the cheapest type of property to insure is a semi-detached house.

When you sign up for a mortgage the lender will ask you if you want to sign up for its buildings and contents cover. This is unlikely to be the cheapest cover.

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Contents insurance

This insurance is optional but it's not a good idea to skimp. In the 12 months before September 2002 it is estimated that there were 991,000 burglaries in England and Wales*, and there are many other ways you can lose your possessions.

Contents insurance covers the things that aren't part of the fabric of your home, such as furniture, electrical equipment and clothes. It also covers curtains, carpets and things in your garden, and most polices also cover the contents of your freezer.

As with buildings insurance, most policies pay out in the event of a burglary, vandalism, fire, storm and flood, and premiums are calculated according to the type of property you own and its location.

However, contents insurance is perhaps more complicated to buy than buildings insurance because of the large number of items most people have in their homes and the wide range of scenarios covered by insurers.

Accidental damage cover is available on contents insurance policies. This will protect you against things like paint spillage and damage caused by pets, so it's a good idea to take it if you plan to redecorate or have a cat that loves to scratch furniture.

You need to look closely at the policies on offer if you work from home.

Some insurers automatically cover some home office equipment. This kind of cover built into a standard policy should be fine if you work alone and at your computer, but if your employment involves specialist equipment, or you employ other people, you need to speak to insurers about more specialist cover.

If you have valuable items you may need to add extra cover, or consider a separate policy, as most policies cover valuable individual items only up to a specified limited.