Buildings and Contents Insurance

Home-owners need two types of insurance to protect their property and possessions.

Home-owners need two types of insurance to protect their property and possessions from accidents, damage and theft.

Buildings insurance pays for repairing or rebuilding your home – including damage to the fixtures and fittings, which are built-in kitchens and wardrobes, sinks and baths.

Contents insurance protects personal possessions –things that can be packed up and moved, like pictures on the wall, carpets and the TV.

Buildings insurance

Buildings insurance must give you enough cash to rebuild your home from the foundations up.

The rebuilding cost is not how much your home is worth but how much is needed to spend for putting an identical property back on the plot.

Surveyors have a formula to calculate rebuilding costs that is approved by insurance companies. It’s lower than the price the property would fetch when sold because the land is included in the sale price and the land is unlikely to suffer any damage even if your home is completely destroyed.

As a rule of thumb, the rebuild cost is about 66% of the property’s market value, with the price of the land making up the rest of the total.

Contents insurance

The ‘sum insured’ is one of the most important clauses of a contents insurance policy. The ‘sum insured’ is the most an insurer is liable to pay, regardless of the value of all the possessions in a property.

The average value of the contents of a property is about £44,000, according to the Association of British Insurers.

It’s important to list a home’s contents give them a fair value so you can set your sum insured correctly.

If it’s too high, the insurer only pays out on the value of your possessions and you have wasted money paying for cover that wasn’t needed.

If it’s too low, the insurer will pay out less than your possessions are worth if you make a claim.

Buildings and contents insurance conditions

Read the policy small print so you understand exactly what the insurance covers is important.

A basic policy from any insurer should cover at least fire or theft. Your postcode may mean you need extra cover because you live in a flood risk zone or a high crime area.

Index link your rebuilding cost to make sure the cover increases with inflation and ensure you tell the insurance company about any home improvements that increase the value of your property so the rebuilding cost is increased to include them.

Avoiding rejected claims

Warning… you insurance company will try and avoid paying a claim if they think they can. One trick they use is to say you have contributed to the claim by failing to maintain your property.

Regularly inspect your property and make sure you deal with minor repairs before they cause major problems.

Look after your possessions by fitting insurance company approved locks and make sure gas and electric supplies and appliances are regularly maintained.

Even joining the local neighbourhood watch can earn you a small discount with some insurers and shows you are security conscious.