House Contents and Buildings Insurance
Insuring your house contents
Your movable possessions can be protected by contents insurance. You can make a claim on the policy if any possessions are damaged by a range of disasters — from storms to fires — or they are stolen.
New for old
Choose a policy which offers ‘new for old’. It allows you to buy new items to replace those that are stolen or damaged. ‘New for old’ policies are more expensive than ‘indemnity’ policies which only pay secondhand values.
What are they worth?
Working out the value of all your possessions can be difficult. Some companies use a formula depending on the number of rooms in your house. Or contact the Association of British Insurers (http://www.abi.org.uk/ tel. 020 7600 3333 ) for their leaflet which contains a useful checklist.
The risk of ‘averaging’
Beware of under insuring your possessions. It can lead to ‘averaging’, when the insurance company scales down your claim in proportion to the amount you are under insured. Say you are under-insured by a total of 20 per cent, and your television is stolen. The insurance company has the right to deduct 20 per cent from the cost of replacing it.
Insurance premiums (the amount you have to pay) vary enormously from company to company. Insurance companies rate each area for risk, and an area rated high risk by one company may be rated lower by another. Urban areas are usually the most expensive.
Look out for discounts
Make sure you are getting any discounts that are available. There may be a reduction if you live in a Neighbourhood Watch area, if you have a burglar alarm or secure locks, or if you are over 55. Some companies are now offering no-claims discounts if you don’t make a claim.
Most companies automatically increase your insurance cover in line with inflation each year. This puts up the cost, but it means less risk of under-insurance. Check that your company does this, but every couple of years make sure the coverage is still enough.
What’s an accident?
Most policies pay for accidental damage — for example, if a picture falls off the wall and the frame and glass break. But what is and isn’t insured varies a lot. Check that the policy gives you what you want. If you have a computer, you may not be covered if you pour coffee into it. If you keep a well-stocked freezer look for a policy which covers you if the contents are ruined by a breakdown or power failure.
Make a separate list of all items of value, such as antique furniture and jewellery. It you haven’t had them valued recently, it may be worth doing so. And take photographs of them as proof of ownership. The amount of cover on ‘valuables’ is normally restricted to half the total. If it comes to more you may have to pay more.
Get an ‘all risks’ extension for items like cameras, jewellery or musical instruments which are regularly taken out of the house.
If you keep cash at home, check the amount of cover in the policy and restrict yourself to that amount.
You get automatic personal liability insurance with contents insurance. This pays out if you are sued because someone or something in your house has caused damage, or has injured or killed someone. Look for policies which provide cover of at least £500,000.
Are you an employer?
If you employ people — a cleaning lady or a nanny, for example — check that the policy has employer’s liability insurance which covers you if a person working in your house is injured or killed.
Insuring the house itself
Anyone who owns or is buying their home needs buildings insurance. This insurance pays out if your home, or the fittings in it, are damaged. If you are adequately insured, buildings insurance always pays the full cost of repairs. There is no adjustment for wear and tear.
Most misfortunes are covered, including fire, storm, flood, subsidence and theft. There are some exceptions though, such as storm damage to fences and gates. Nor are subsidence claims met in full. Most policies require you to pay the first £500 of any claim.
• Make sure you aren’t under insured, and even if the policy is index-linked check the level of insurance every couple of years. Shop around for value for money and get any discounts that are offered.
• Remember to maintain your house. You will not be covered for damage caused by your neglect.
• Your policy won’t automatically cover you for accidental damage to your home. If you want to insure against any sort of household accident, be it the possibility of dropping a hammer in the washbasin or burning a hole in the worktop of your fitted kitchen, you must ask for additional accidental damage cover when you arrange the policy, and you will pay extra.
• You can reduce the cost of accidental damage cover by offering to pay the first £50 or £100 of any claim that you make.
A Mortgage Company’s Insurance isn’t Compulsory
Most people take the buildings insurance offered by their mortgage lender. But you don’t have to. Your mortgage lender may charge you a fee if you go elsewhere, but you can still save money by shopping around. But remember to keep previous insurance policies. If you do swop insurers, they may refuse a claim for subsidence if they think it started while you were insured with a different company. If this happens, you will need to make a claim on your old policy.