What is home insurance? Home insurance is actually an umbrella term used for two separate types of cover – buildings and contents. They are just often taken together by the same insurer.

The buildings part covers damage to the actual bricks and mortar of your home. The most common examples of this are fire, flooding or leaking pipes. However, policies also cover subsidence (when the ground contracts under your home causing the structure to move and crack), storm damage and even the impact of items falling out of passing aircraft.

As well as the shell of your home, buildings insurance also covers permanent fixtures and fittings such as baths and toilets, fitted kitchens and bedroom cupboards. Outbuildings like garages, greenhouses and sheds are typically also covered – though you should always check the finer print of your policy for details.

Your buildings insurance premium is calculated on how much your home would cost to rebuild which is much cheaper than the value an estate agent would put on it. This is because a rebuild cost excludes the most expensive part of its value – the land your home sits on. You can calculate the cost of your home’s rebuild here.

Why home insurance is important

The thought of your home burning to the ground is pretty unbearable – but it would be more unbearable still if you did not have adequate buildings insurance in place. Essentially this could mean you are left without a home but still with the monthly mortgage commitment that you took to pay for it!

That’s why banks and building societies insist that buildings cover is taken at the point of signing a mortgage agreement. That said, as with any other type insurance, you are only covered if you continue to pay the premiums which is ultimately your responsibility.

Even just repairing damage to your home is very expensive. According to the Building Cost Information Service (BCIS), the average cost of rebuilding a side wall (including insulation) for a terraced house is a hefty £12,590 while costs for underpinning your home in the event of subsidence can literally run into tens of thousands of pounds.

These are all good reasons why, however many financial cutbacks you may need to make during leaner times, buildings insurance should never be one of them.
Contents insurance The contents part of home insurance covers everything inside your bricks and mortar. As a rule of thumb, if it were possible to turn your property upside-down and shake it, everything that fell out would be covered by contents insurance while everything that stayed put including pipes and fixtures and fittings, would be covered by buildings insurance. This is why you should always take out contents insurance even if you are renting from a landlord.

Many claims for contents are made in tandem with buildings. After all if your bricks and mortar is damaged in the event of a fire, flood or leaking pipes, your belongings will be too. However, crucially, you will also need contents insurance to cover you against the risk of burglary. It follows then that the more secure your home – in terms of double glazing, locks and alarms – the cheaper your contents premium will be.

Adding it up

You will need to present to your insurer a monetary value of the contents of your home – something known as the ‘sum assured’. You can do this by literally walking around each room and totting up the value of your belongings. However, bear in mind the figure usually refers to what the items would cost to replace rather than what they are currently worth.

Some insurers will estimate the value of your contents for you using the number of bedrooms in your home as a benchmark. This is called a ‘bedroom rated’ calculation. Other providers now offer unlimited cover on contents but require that items worth over a given amount are insured separately.

Very valuable items, such as jewellery, family heirlooms or even some musical instruments, will always need to be declared separately.

Bear in mind that underestimating the total value of your contents in a bid to keep down premiums is a false economy. This is because if you ever have to claim, the payout will simply fall short too.

Keeping fully covered

It is important that you keep abreast of the changing value of both your rebuild cost and your home’s contents as both can change. For example, you may have had central heating installed, had a loft conversion built or just bought a new state-of-the-art sound system. Extra cover may not even necessarily translate into higher premiums, so it could be you have nothing to lose at all.

We may take them for granted but our homes play a vital and central role to our security and happiness, making home insurance one of the most crucial policies you can buy. Shopping around for the best deal while ensuring you have ample cover for your home and its contents is certain to be time well spent.