What to Look For With Home Insurance

Home insurance compensates the policyholder for damage, loss or theft of personal possessions.

Home insurance, commonly called contents cover, is designed to compensate the policyholder for damage, loss or theft of personal possessions.

The best way to think of personal possessions covered by contents insurance rather than fixtures and fittings covered by buildings insurance is that possessions are items that can be moved from property to property, like furniture, kitchen equipment and beds.

Two types of contents insurance are available:

• ‘New for old’

For example, if your computer is stolen, the insurer will pay for an identical model or, a newer one of similar specification.

Some possessions like clothes and antiques are not necessarily replaceable ‘new for old’.

• Indemnity

Indemnity cover pays out for the cost of the possession less wear and tear.

For example, if you bought a TV for £1,000 three years ago, the insurer might deduct wear and tear at 10% for each year and pay you the balance of the value of the TV.

So, to calculate the wear-and-tear you deduct 10% of £1,000 or £100 in year one, 10% of £900 (£1,000 less last year’s wear and tear of £100) or £90 in year two and 10% of £810 (£1,000 less £100 less £90 wear and tear for the previous two years).

That leaves an indemnity value of £729.

Work out the policy sum assured by going round your home listing everything you own and working out the cost new.

If you have high value items like antiques or jewellery worth more than £500 each, list them as ‘named items’ on your policy.

Collections are ‘named items’ if they contain separate items worth more than £500 each, so if you have several paintings worth £100,000 and each is worth more than £500, list each painting as a named item.

Contents insurance cover risk like theft, loss or damage to your property. Every insurer has a slightly different idea of what is covered and what is not.

Some may cover accidental damage; some will not entertain the thought.

Insurance companies are willing to reduce your premium if you take on the responsibility of protecting your possessions.

• - Paying an excess generally reduces the cost of your insurance.
• - Many insurers offer discounts if you:
• - Put in a burglar alarm
• - Join your neighbourhood watch
• - Fit good locks to your ground level doors and windows
• - Build a no claims discount

Besides reward responsibility, they punish by not paying out if they feel you could have done more to prevent loss or damage.

Common reasons for declining a claim are:

• No forced entry when reporting a loss or theft
• You share your home with a lodger or tenant
• Homes are left vacant for 30 consecutive days or more
• Valuable possessions are left insecure

If you work from home, extend your home insurance cover for extra risks that may arise from loss or damage to office and computer equipment.

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