Home Insurance Basics
Like most other finance topics, insurance can be an incredibly complicated and impenetrable subject, filled with jargon few lay people will understand at first glance. Of course, some types of insurance are for such obscure areas that few people need concern themselves with the ins and outs, and if you need to insure off the beaten track, then an expert advisor can always be consulted.
This isn't really the case when it comes to home insurance - it's something that most of us buy at some point, and it's a fact of life that people with a mortgage will absolutely have to take out sufficient cover. With this in mind, and also considering the potential expense and damage caused if an unsuitable policy is bought, it's important to understand at least a little about the subject before signing up with a home insurer.
Type of Cover
The most basic question to ask is which kind of cover you need. There are two basic types: buildings insurance, and contents.
Buildings Insurance
This insurance covers the actual structure of your home, the bricks and mortar, roof etc. Should your home be damaged by, for example, a storm, then it is this kind of insurance you need. Your home should be insured for its 'rebuild cost' - i.e. the amount of money you'd need to spend to rebuild your home from scratch if it was so severely damaged that this was necessary. This rebuild cost may or may not be similar to your home's market value - your insurer will be able to advise on this when giving a quote.
Contents Cover
This type of insurance covers your possessions, and more advanced home fixtures such as bathroom suites or fitted kitchens. You should be covered for loss of possessions through burglary, fire or flood, maybe even accidental damage you yourself cause, depending on the policy. Before taking out a policy, make a list of everything you own and work out the amount of money you'd need to spend to replace it all, and use this as a starting point for working out how much contents cover you'll need.
Take Out Both Types?
As mentioned earlier, mortgage payers are required to have adequate buildings insurance as part of their mortgage agreement. Tenants should find that their landlords are responsible for buildings insurance, but check your tenancy agreement to be on the safe side.
It's a good idea for everyone to take out contents insurance, even if you can't afford the premiums to cover absolutely everything you own, you should take out at least some cover to give you a safety net if disaster should strike.
You can buy both these kinds of insurance separately or together as part of a package, and although there's nothing forcing you to buy both policies from the same insurer, it's usually a good idea to do so as you'll be offered worthwhile discounts on your premiums.
DISCLAIMER: All content is for guidance only and does not constitute individual financial advice.
www.homeinsuranceinfo.co.uk is not authorised by the FSA to advise on insurance matters.
