There are basically two types of home insurance to choose from in the insurance sector - contents insurance and buildings insurance. Contents insurance will give you protection if anything (such as theft, damage by fire or flood or accident etc) damages your possessions in your home. Buildings insurance will give you protection in case anything actually happens to the building itself.
The contents insurance policy you take out should take into account all of your belongings from furniture to clothes and electrical equipment. It is important here to make sure that you value your possessions accurately as under insuring your contents simply means you won’t get enough money from the insurer to replace your stuff.
Most insurance companies will also ask that you have high value items (such as computers and expensive electrical items) insured separately. It’s also a good idea to have your insurance on a ‘new for old’ basis. This means that the insurance company will pay the costs of replacing something at its value today rather than the price you originally paid for it. Look out for accidental damage cover as well which comes automatically with many but not all contents policies.
Most insurance companies will offer a range of basic cover options with some additional features that you can add on if necessary. These could include, for example:
- Legal cover - legal cover will give you money to cover your legal costs in certain situations.
- All risks cover - this cover will give you insurance protection for items that you take out of your home. So, it can be useful for mobile phones, MP3 players and so on.
- Freezer cover - this cover will pay you a specific amount if you lose the contents of your fridge/freezer due to a specific problem.
- Garden cover - this cover will protect you if something is stolen from your garden shed, for example.
You need to insure your home for its rebuild costs and not for how much it is worth if you were to sell it. Most insurance companies have a calculator that will help you work this amount out. The rebuilding cost will be lower than the market value.
This kind of policy will give you cover against damage caused to your home due to issues such as fire, theft, accident, flood and so on. Again, accidental damage is a good option to have here.
If you took out a mortgage to buy your home then the chances are that your lender will insist that you take out at least buildings insurance as part of your mortgage agreement. This doesn’t have to be taken out through your lender and it may well be cheaper to buy a policy elsewhere.