Guide to Protecting your HomeGet a quote
Guide to Protecting your Home
Inevitably, any such guide focuses on the central role played by home insurance and the essential partnership between the insured home owner and the insurer in ensuring an appropriate and comprehensive level of protection. The relationship is one that we have particular experience and expertise in developing with our customers here at GSI Insurance.
This guide takes a look at the general principles of insurance and how it plays such a central role in looking after the castle you call your own particular home.
But it also recognises that home insurance may frequently be a much bigger and more complicated question than simply insuring the standard risks of loss or damage to the building and its contents.
It considers some of the exceptional circumstances, for example, when the home is:
- left unoccupied for any length of time;
- undergoing renovations; or
- at risk of subsidence;
The guide also considers some of the special forms of insurance cover that might be necessary if, for instance:
- you are the landlord of an investment property that has been bought to let; or
- if you work from home.
Finally, the guide looks at ways in which you might respond to a number of domestic emergencies so that when something goes wrong prompt remedial action may prevent any further loss or damage from occurring.
The guide aims to be as comprehensive as possible, but there is always the possibility of course that you still have queries and questions to be answered. If in any doubt at all, therefore, you might want to contact us directly to discuss your individual concerns about protecting your home.
Why you need insurance
The whole of the insurance industry is able to trace its roots back to the realisation that property needs to be protected against the peril of fire – at the very least – following the Great Fire of London in 1666 and the destruction of some four-fifths of all buildings within the city.
Home insurance and your mortgage
These days, however, if you are in the process of buying your home with the help of a mortgage an immediate reason for arranging home insurance is simply because your lender insists upon it.
Since the mortgage company is advancing a loan for the purchase of the property, it has an interest in ensuring that the structure and fabric of the building itself is adequately protected in the event of loss or damage. A condition of the mortgage advance, therefore, is normally that you maintain the appropriate level of buildings insurance.
You might be reminded at this stage that the appropriate level of insurance is not limited to the price that you paid for the property but the amount of money it is estimated to cost to clear the ruins and completely rebuild your home in the event of a major disaster resulting in its total loss.
Cover for the home itself needs to be distinguished from a further form of insurance on which your mortgage lender might insist – mortgage indemnity insurance. In fact, this is protection designed entirely for the benefit of the mortgage company in the event of your defaulting on the repayments. You may need to pay the premiums for this type of insurance, yet it is the mortgage company alone that stands to benefit.
The principles of insurance
Although one of the more obvious reasons for arranging home insurance is because your mortgage lender requires it, there is rather more to it than that. Just how much more might begin to become clear through a brief review of what are widely held to be the six principles of insurance:
- indemnity: this principle lies at the very heart of the insurance contract and is the agreement under which the insurer pays the insured compensation, to a level laid out in the insurance policy, following any loss or damage;
- insurable interest: in order to arrange insurance cover you need to have what is called an insurable interest in the property concerned and this is typically demonstrated by your owning or having some other financial interest in it;
- uberrimae fidei: long established in English common law is the principle that any insurance contract is founded on the “ultimate good faith” (“uberrimae fidei” to give it its formal Latin term), which requires you to disclose to your insurer any material fact, or relevant information, about the property you want to insure;
- proximate cause: this is the principle that determines whether the loss or damage for which you want to make a claim was in fact caused by one of the perils listed in the insurance policy – in other words, what actually caused the loss or damage;
- subrogation: this is the principle under which you grant to your insurer the right to pursue any third party whose actions or inactions are considered to have caused or to have contributed to the loss or damage for which you are claiming – it is sometimes described as the insurer “stepping into the shoes” of the insured in order to recover compensation from the negligent third party;
- contribution: contribution is the right of an insurer to call upon the other insurers to share the costs of a successful claim payment where the insured party has policies with two or more insurers covering the same risk.
- Against this background of the guiding principles of insurance, it is possible to examine more closely how insurance relates to the protection of your home.
Protecting your buildings
When you are thinking about protecting your home, the chances are that you are thinking about safeguarding the very building or buildings themselves. So, what is likely to be involved in looking after the actual structure and fabric of your home?
What does buildings insurance cover?
In extending protection to the structure and fabric of your home, buildings insurance covers loss or damage to the roof, floors, walls, ceilings, windows and doors, together with permanent fittings and fixtures, any internal decoration and those pipes, cables, tanks and drains for which you are responsible carrying utilities from the mains supply to your home.
Loss or damage to out buildings – including garages and sheds – and boundary walls and fences may also be covered – check your policy wording if you are unsure.
The Citizens’ Advice Bureau lists the perils typically covered by your home buildings insurance and these include:
- storm damage, including flooding and lightning strikes;
- escape of water from frozen or burst pipes;
- theft, vandalism and malicious damage;
- impacts from falling objects, aircraft or vehicles; and
- depending on the policy, subsidence (but see also below).
Accidental damage to the exterior of your home may be an optional extra in the insurance cover you arrange.
The amount of buildings insurance needs to be sufficient for the complete reconstruction of the home in the event of a major insured event leading to the total loss of the property. As already noted, this needs to reflect the cost of rebuilding, clearing debris from the site and fees to architects, rather than the current market value of the existing property. It is also important to bear in mind that the level of insurance cover required by your mortgage lender is likely to be limited to the value of any outstanding balance on your mortgage and not the full cost of replacing your home in the event of a total loss.
Buildings insurance also typically covers the cost of any alternative accommodation that may be needed whilst the home is undergoing repairs that are required following an insured event.
Buildings insurance typically includes provision for property owner’s liability in the event of claims from third parties alleging your responsibility for their personal injury or the loss or damage to their property.
What is unoccupied property insurance?
The purpose of this type of insurance is probably self-evident from its name – insurance cover designed to safeguard a property whilst it is unoccupied. But why is it necessary?
When you arrange standard buildings insurance for your home, your insurer does so on the basis of the property being occupied on a continuous basis. If the home is unoccupied for longer than about 30 to 45 consecutive days (the exact period may vary from one insurer to another) the level of cover is typically severely reduced or may lapse altogether.
The reason is because an unoccupied property faces different – and increased – risks when it is vacant compared with when someone is at home on a continuous basis. The empty property, for example, may face increased risk from:
- vandals and other intruders;
- minor maintenance problems that may become more serious and more damaging events because there is no one at home to take early remedial;
- in the event of wintry weather or the danger of flooding, there is no one on hand to turn up the heating or to take anti-flooding precautions.
Even with an appropriate level of unoccupied property insurance in place, however, it is important to remember your continuing obligations to help mitigate the risk of any loss or damage.
Our guide here explains this in more detail.
What is landlord’s buildings insurance?
In the same way that an insurer needs to know whether the building is continuously occupied by its owner or has been vacated for longer than about a month or more, it is also important to distinguish between an owner occupied home and one that has been bought for let to tenants – the risks differ.
For that reason, landlord’s insurance is quite different to the standard buildings insurance suitable for the owner occupier.
Indeed, if you hold only standard home insurance and need to make a claim, when it is discovered that you have insurance as an owner occupier but are in fact letting out the property, your claim is likely to be rejected. You might even be considered to have committed insurance fraud.
If you are the landlord of a buy to let property, it may prove especially important to ensure that you have adequate public liability indemnity to safeguard against claims not only from members of the public, but also from tenants and their visitors.
What is subsidence cover?
As previously mentioned, buildings insurance may include subsidence among the perils covered. But this is by no means always the case. If your home is in a location previously subject to subsidence or if you are concerned that it may be a problem in the future, therefore, you might want to make sure that subsidence cover is included.
Subsidence has the potential for causing extensive and expensive damage to your home. Whilst early remedial action may limit the damage, it may be difficult to successfully diagnose the problem. As suggested by the Royal Institute of Chartered Surveyors (RICS), you might want to instruct a professional surveyor to investigate.
For still more information and for advice on getting insured against the risk of subsidence you may read our special Guide to Subsidence.
Protecting your contents
Your home is considerably more than just the building that houses it of course. Equally important, it might be argued, are the contents – and the efforts to which you have gone to equip and personalise the inside of your home might easily assume a considerable value.
Unlike buildings insurance, your mortgage lender has no interest in insisting on your arranging contents insurance – but you might nevertheless want to consider just how it might safeguard all of your possessions.
This is also important is you have particularly high net worth possessions. (Read our in depth Guide to High Net Worth Insurance here).
What does contents insurance cover?
Wikipedia has probably one of the most concise definitions of just what is covered by contents insurance – cover for your personal possessions whilst they are within your home and, depending on the contents policy you choose, whilst those possessions are temporarily removed from your home (if you take them away on holiday with you, for example).
Your personal possessions are any items which are not permanently fixed to the building itself, includes furniture, carpets, all your electrical appliances and may also – depending on the policy – cover items normally stored in an out building or shed.
Risks typically covered include:
- flooding and storm damage;
- other natural disasters;
- theft; and
- malicious damage and vandalism.
When arranging contents insurance there are two principal considerations to take into account:
- valuation – an accurate and up to date valuation of the contents of your home is important in order to avoid the risk of under-insurance or over-insurance;
- you might find it helpful to prepare a detailed inventory on a room by room basis to ensure that all items are taken into account;
- an alternative is to purchase contents insurance that covers all possessions up to a maximum fixed amount;
- there may be a limit on the maximum value of individual items to be covered, so that particular valuable – works or art or jewellery, for example – may need to be listed separately;
- settlement – the other significant consideration is the basis on which settlement is made in the event of a claim;
- thus, you might opt for a “new for old” basis of compensation, where any item is replaced at today’s price; or
- a “wear and tear” basis where depreciation is taken into account and claims settlements are accordingly reduced – but so too is the cost of premiums.
Working from home insurance
If you are working from home, simple contents insurance may not be enough and you might prefer to contact us here at GSI Insurance to arrange our specialist working from home insurance.
Quite simply, your work from home is likely to involve an additional inventory of office equipment and machinery, not to mention the possibility of any stock you might be holding and the extra business liabilities you face – where public liability insurance may need to reflect the risks of injury or other damage to visiting customers or business associates and where employer’s liability cover may be essential if you employ others to help run your business.
The good news is that the cost of such working from home insurance is likely to be an allowable or deductible business expense when it comes to filing your annual tax return.
There are still further forms of insurance cover which may prove valuable in helping you to protect your home.
Domestic emergency cover
This safeguard provides you with a first response capability in the event of a household emergency or the need for immediate assistance.
Insurers offering this form of insurance typically maintain or are in partnership with a network or contractors already approved and authorised to attend a domestic emergency – such as a burst water pipe, for example.
It is an extra line of defence which has its attractions not only for the home owner or landlord, but also to the principal insurer since an immediate emergency response to a problem might nip it in the bud and prevent the initial incident becoming more serious – and resulting in a more expensive claim.
If you are planning a major remodelling or refurbishment project, neither the provisions of your standard home insurance nor the cover under which your contractors may be working are going to be adequate. That is where renovation insurance comes in to plan. (You can read our guide to renovation insurance here. Renovation insurance is such a specialist product that home owners or landlords may do best to take advice from an experienced and expert provider – such as those of us here at GSI Insurance.
When arranging renovation insurance you might want to take into particular account:
- the adequacy of public liability provisions – to protect you against claims from members of the public who may suffer a personal injury (or even death) or have their property damaged as a result of your building works;
- the importance of maintaining sufficient cover for the existing structure and fabric of your home; and
- the flexibility of being able to extend your renovation insurance on a month by month basis if the building works overrun.
What ever size and shape your particular castle, it may have become apparent just how important it may be to protect your home and to appreciate that probably the most appropriate method for doing so is through insurance.
But home insurance itself is a wide and potentially bewildering subject in itself.
Even the most fundamental of concerns – the protection of the structure and fabric of the building – may be complicated in the event of the property becoming vacant or unoccupied, if it is used as a rental property or if the risk of subsidence is a proven or perceived danger.
It is almost certain to be the case that the contents of your castle also represent a considerable investment and one that may have been built up over an appreciable period of time. Putting an accurate and up to date valuation on every item of those contents is important, but so too is the basis on which any settlement may be made in the event of your needing to make a claim.
If you are working from home, a simple contents policy may be insufficient for safeguarding the additional business equipment and stock you may have at home or the particular liabilities and possibility of disruption your business may face. To help safeguard both your home and your business in the face of such perils, special working from home insurance is available.
There are ways of helping to mitigate the risks of loss or damage to both the buildings and contents of our home. One of these is domestic emergency or assistance insurance, which provides a first response capability that may prevent a relatively minor mishap from becoming a major incident.
Finally, you might want to beware certain misleading myths that may all too easily be circulating when it comes to safeguarding your property. An example is given by the specific risks and perils that might only be adequately met by arranging renovation insurance when major remodelling or refurbishment works are in progress at your home.