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Home Insurance FAQs
Do I need home insurance?
No law requires you to have home insurance – but it is a financial safeguard you might well want in place to protect what is likely to be your biggest investment, in either the bricks and mortar or the property or, indeed, its contents.
But my mortgage lender insists I have it
That’s right. Mortgage lenders usually insist on cover for the building itself – it is their way of ensuring that the advance they made to you is protected. If you fail to meet the terms of their contract – i.e. to get at least the bare minimum buildings insurance cover – they could insist you repay the outstanding balance mortgage amount immediately.
So home insurance is mortgage insurance?
No. Mortgage insurance is a safeguard your lender might arrange to cover the risk of your defaulting on the mortgage repayments – you pay the premiums, but the insurance is entirely for the benefit of the mortgage lender.
What is meant by home insurance?
Typically, home insurance is a description for two separate types of cover, one for the structure and fabric of your home and the other for its contents – therefore it is often referred to as home building and contents insurance.
The two may be bought separately, but are commonly bought together, and you are likely to be offered a discount on the premiums if you do so – specialist providers such as those of us here at GSI Insurance are able to advise whether a combined building and contents insurance policy might be appropriate for you.
Whether you buy them together or separately, House to Home magazine recommends that your home filing system has one folder for the building insurance and another for the contents.
What does building insurance cover?
Building insurance is important because it protects the structure and fabric of your home against such serious risks as fire, flooding, escape of water, impacts, storm damage and vandalism.
Incidents such as these might result in the total loss of the building, requiring it to be constructed anew.
The amount of building insurance, therefore needs to be sufficient to cover such rebuilding costs. Clearly, the sum is likely to be different to the purchase or current market price of the dwelling and is likely to fluctuate over time as building costs change. The Royal Institute of Chartered Surveyors (RICS) publishes a Building Cost Index showing the change in such costs on a month by month basis.
You might also note that the amount of building insurance required by your mortgage lender might only be sufficient to cover the mortgage advance and not the total rebuilding costs which you may need.
What does contents insurance cover?
Contents cover provides protection for the belongings and possessions you keep at home – they are exposed to similar perils as the building itself, together with the risk of accidental damage, loss and theft;
In providing cover for these risks, claims on your contents insurance may be settled either on the basis of replacing lost or damaged items on a new for old basis or after the deduction of the estimated depreciation or their “wear and tear” – cover on a new for old basis is clearly more expensive than the lower amount settled on a wear and tear basis.