If you have ever been in the position of needing to make an insurance claim when you have suffered a loss, you will know how important it is to have the right amount of coverage so that you are not left counting the cost through your own pocket.
This home insurance guide takes a look at how you should set about getting the right policy and adequate level of cover, so that you can safely protect your building and its contents.
When disaster strikes
It is very hard to avoid the fact that home insurance is an essential part of what you need to protect what you have and to give you a reasonable level of comfort, that you are adequately covered if disaster strikes.
It is far too easy to underestimate the total value of your contents and what it would cost to replace them at today’s prices. Just take a look at the stack of DVD’s and CD’s that you own and you will probably soon be running into hundreds of pounds to replace the collection alone.
Add in all the other seemingly insignificant items and add them to the value of the so-called big ticket items, and you soon arrive at a higher than expected sum that you would need to go out and buy them again.
If you own your own home and you are paying a mortgage, then buildings insurance will be a stipulation under the terms of any lenders standard rules.
Buildings insurance is designed to cover the structure of your home and the cost of your policy will vary depending on the size, type, age and location of your home. The main component of buildings insurance is the rebuild cost, which is often referred to as the sum insured.
This is very simply, an accurate estimation of what it would cost to build your house again at current material prices, if it were to burn down or be damaged beyond repair. Your mortgage lender will normally issue guidance as to the amount of the sum insured that they require your buildings insurance policy to cover.
When you arrange contents insurance, you need to arrange just the right amount of cover. If you undervalue the total value of your possessions it might mean that your insurer could potentially refuse or adjust your claim, leaving you out of pocket.
The opposite scenario is when you have too much cover for the total value, which will mean that you end up paying more for your insurance premium than you probably need to. There are three types of contents insurance to consider –
This is where the insurer calculates the amount of insurance that you need based on the number of bedrooms you have in your home. The main advantage to this policy is that you don’t have to work out how much insurance you need as the standard level of cover is often between £40,000 and £50,000, which takes the element of guesswork out of the equation.
This is a policy where you have to calculate the right amount of cover that you need and then arrange an insurance company to quote you for this amount.
Unlimited sum insured
As the name suggests, this is a policy where all of your contents are covered without any limits being imposed, which takes away the anxiety of being underinsured.
You can decide which policy is most suitable for you but you should be aware that some resources like comparison sites don’t always offer you a choice. This is because the online questionnaire will normally ask you how much cover you want and then select a policy that fits this criteria.
One area where some homeowners can make a mistake is when they fail to specifically list or nominate any particular items of high value.
Always check with your insurer whether they impose a limit on certain items like jewellery. If you are fortunate enough to own a very expensive ring or painting, you need to tell your insurer so that they can agree to cover its true value as part of the policy.
This will often cost a bit more on your premium but that is better than finding you won’t get paid for an expensive item because you have fallen foul of their individual limits.
If you are unsure how much your contents are worth, you may want to choose a bedroom rated policy or at least talk to the insurer to discuss your contents in greater detail and therefore avoid a potential financial headache should you need to make a claim.
Jamie Wells is a personal finance consultant. His articles mainly focus on the challenges of property investment and ownership.