In simple terms, home insurance is there to either rebuild all or part of your house. Or replace the contents if they're damaged. There's also a range of other opt-in products you can layer on top of your basic home insurance to tailor it to your needs. Products like:
Simply, buildings insurance covers your bricks and mortar.
It's there to cover your house should it fall down, be left structurally unsound after a fire, hit by lightning etc.
You'll need to have this in place when you're buying your own home as your mortgage company will insist on it.
The amount of cover you'll need will be based on how much it would cost to rebuild the house. So while you may have a £150,000 mortgage on your home, the cost to build it is likely to be less than that. Part of the cost of your mortgage will also be for the land it's sat on.
But don't worry, you don't need to work out how much the rebuild would be. Once you put your mortgage amount into a home insurance quote, most sites will give you the average rebuild cost. That cost is based on how much you paid for the home.
That depends if you're renting or if you've bought your home. If you're renting, your landlord should have buildings insurance to protect their investment.
Always check with them to be sure though.
If you own your home, you might need buildings insurance as a mortgage requirement.
Otherwise you're likely to need it to cover the cost of the repairs or rebuild, should anything happen to the actual building.
In either event, whether you rent or own, you should give some thought to contents insurance.
The value of the contents in your home can tot up quickly. Whether it's the cost to replace your furniture, your tech (TV, sound bar, games console, laptop/PC etc), or just your wardrobe and Blu-ray collection.
Contents insurance will cover if your items are stolen or destroyed by a fire. If you opt to have accidental damage too you'll be covered if you knock the TV over and smash it.
Just like with car insurance, and most other types of cover, there's an excess to pay should you claim.
An excess is where you pay the first amount of money towards the claim, whether that's £150 or £500. It differs depending on the insurance company.
It's the same as with car insurance. The excess is made up of a compulsory excess and a voluntary one. The insurance company decides the compulsory excess part.
You combine these together to know what your contribution to the claim would be.
If they pay out, your insurance company will then give you the amount to cover the replacement(s), minus the excess amount.
As an example: You put in a claim to replace your broken TV for £1,000. As you have a total excess of £250, the insurance company would give you £750, as long as they agree to the claim.
A few years ago the government started up a scheme called FloodRe. They set it up to create more affordable home insurance for people in flood risk areas.
Look for an insurer that covers damage from flooding (they often call it 'escape of water'). The government will pay back the insurance company the cost of the payout. This encourages insurance companies to keep premiums down as they're not taking on the full risk.
Insurance for flood risk homes does tend to be more expensive. It's definitely worth looking at home insurance quotes before you move so you're aware of what the cost could be.
If you've done the legwork and found an insurance company you're happy with, great. It's worth giving them a call to speak to them to make sure they will actually cover your home in the event of a flood.
Just like with any type of insurance, it pays to be vigilant. Make sure you read the terms and conditions before you commit to your chosen insurer.
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Insurance
Compare cheap buildings and contents insurance. You could save up to £99*
*Based on online independent research by Consumer Intelligence (December 19). 51% of home insurance customers could save £99.23 on a combined policy.
