For most people, the concept of home insurance breaks down into two distinct categories:
- a form of cover that is typically associated with protecting a building and its structure. This is often referred to as “buildings insurance”;
- financial protection aimed at the possessions that are stored inside that building – typically referred to as “contents insurance”.
Conceptually these are two very different things, though the term “home insurance” is often assumed to cover both.
Insuring your buildings
One of the major characteristics that distinguish this type of cover is that, in many cases, it may be a contractual obligation for the homeowner concerned.
That’s because if there is a mortgage on the property or any other form of substantial loans secured against it, the funds provider will typically have a clause in their loan contract requiring the owner to maintain full buildings cover at all times. While perhaps few property owners would seriously consider failing to insure the building concerned, should they choose to do so, they may well be in breach of their loan agreement.
Typically this cover should be extensive and based upon an accurate estimated cost covering the property’s demolition and complete re-building following a major disaster. It’s important to note that this is not necessarily the same thing as its market value.
Given the typical sums involved in potentially demolishing a property after a disaster and then re-building it, having an appropriate policy of this type in place is only common sense.
This is a slightly different proposition in that it is typically not a contractual obligation in any respect.
Whether you choose to ensure your contents is likely to be a matter for you and you alone. Yet since some expert sources testify that the typical value of the contents in a property today is approaching £35,000, deciding to do without such cover might be seen as high risk.
There are a few points worth considering when it comes two home insurance and specifically, contents cover:
- a standard home insurance policy may have limits on the total amount of contents cover that is provided and also the maximum amount of cover that will be available for a single item. It is worth being clear what these limits are and if they seem to be insufficient in an individual case, to discuss the matter with the insurance provider;
- some types of content may be explicitly excluded from standard contents cover. Examples there might include things such as antiques above a certain age or value, cash, electronic gadgets or perhaps jewellery unless it is secured in a safe within the property. Again, it’s important to look carefully at what the policy states in this area and to be prepared to discuss any uncertainties with the policy’s provider;
- contents cover is also typically written on the assumption that the items insured are for the policyholder’s personal, private and recreational use. If commercial business items are in the home or a business is being run from the property, things such as stock, materials and equipment might not be included in the scope of a standard policy. Yet again it is worth checking if special cover is required in such situations.
Home insurance is something that might prove to be the difference between a problem being an inconvenience or a financial disaster. It’s therefore worth thinking carefully about it and the overall cover levels in place for a given property.