Why is home insurance required?
Some insurances are required by law and are therefore wholly unavoidable, unless you fancy spending time sewing mailbags at Her Majesty’s Pleasure. Like car insurance for instance. It’s a criminal offence to drive a car on the roads without the appropriate motor insurance cover in place.
Some insurances aren’t compulsory though, like for example travel, health, income protection and pet policies. All of which make absolute sense for a variety of different reasons, yet none of which would jeopardise your freedoms and civil liberties were you to overlook arranging policies for. In that second category you’ll also find home insurance, which once again is something which you’re not obliged to sign up to, but are strongly advised to look into so as to safeguard your bricks and mortar – and everything which lies within the four walls and beneath the roof.
When you stop and consider how much a mortgage costs (here’s a clue, nine times out of the ten the single-most expensive investment you’re ever likely to make in your lifetime, after kids), you’d need your head looking at if you didn’t then go out and insure the whole shebang immediately afterwards.
Split into two divisive categories, home insurance covers buildings and home contents insurance, the former being stipulated pretty much most of the time by mortgage lenders as a condition to agreeing a mortgage. The latter however is a different kettle of fish altogether and is essentially up to the homeowner/tenant to sort out as and when it suits them. But like we hinted at the top, not even buildings insurance is a legal requirement as such, merely something which most homebuyers would organise before even looking at wallpaper samples or measuring up for carpets.
Going back to the two-way home insurance split though, and for the sake of repeating ourselves here’s a quick recap explaining the dual purpose insurance product. ‘Buildings insurance’ basically covers the fixtures and fittings of the property, which effectively means the structural skeleton of the building from the very construct (walls, ceilings, roof and floors) to the fitted bathroom and bedroom suite and kitchen units. Think of it this way: if you were to pick up your house and shake it, everything that didn’t fall out of the windows, doors and chimneys – and were therefore welded to the property – are classed as fixtures and fittings and protected under the ‘buildings’ policy.
‘Home contents’ conversely, refer to all the items which fell out of your life-size dolls house after shaking it, and normally means TVs, furniture, clothes, personal belongings and anything and everything else that isn’t pinned down.
Although not a legal requirement, home insurance policies could save homeowners a small fortune in the long run
In terms of purchasing buildings or contents cover (although BOTH are highly recommended), the would-be home insurance policyholder can buy them as separate entities or lump them both together in one fell swoop. This usually tends to work out as the most cost-effective option just for the record. Examining both policies further better explains the logic behind snapping up both covers sooner rather than later if you’re entertaining the idea of buying/moving into a new house. Scrutinising what each covers the policyholder for, at a glance, and buildings policies provide the necessary financial support if you need to rebuild your home in the event of it being damaged/devastated by a host of unpredictable occurrences rendering it inhabitable. And this would be a timely juncture to impress upon interested parties that this monetary figure (as the sum insured) would need to represent the cost of building the property from scratch, rather than how much it was worth in terms of value on the current, pre-damage property market; a mistake a lot of people are prone to making.
The factors which are recognised by most home insurers as consistent with causing the type of damage which would trigger a claim in the buildings arena are the likes of fire, smoke and explosions, as well as storm and flood damage, falling trees, subsidence, vandalism, vehicle impact and subsequent damage consistent with leaking utility pipes/heating systems.
More often than not, exterior structures which form part and parcel of the scope of your property are included (although always check the small print) in buildings policies, including fences, outside walls, garages and driveways. While these are the predominant elements that buildings insurance DOES cover, be mindful of those that it DOESN’T. Vermin infestation, frost damage (unless accepted as a by-product of leaking pipes in the first instance) and leaking gutters are not historically protected by this insurance product, and nor while on the subject are any consequences of your property being left unattended for a period greater than 30 days; although a special feature can be arranged beforehand to safeguard this.
Buildings insurance is definitely worth the initial bother (not that it is any, despite people’s reservations) not least because of the escalating costs of property repair work, with individual jobs often costing £100s if not £1,000s of pounds to put right if it was to come out of your pocket. Compare this with the average buildings insurance premium of less than £200 annually and you quickly see the advantages to this locking the gate before the horse bolts forward-thinking strategy. Of course it’s always pertinent to read the all-important T’s & C’s before committing to any insurance plan, as increasing numbers of exclusions are applied which you need to be aware of from the outset.
Buildings and home contents insurance policies are a price worth paying to ensure peace of mind
Moving on to contents insurance and as we’ve already established this department of home insurance incorporates everything that would fly off the shelves in the event of an earthquake. Not that the UK is particularly prone to these acts of God, but we digress.
Contents insurance extends to cover the policyholder against loss, damage or theft of everything that’s considered to be personal belongings/possessions. Traditionally this is the label which applies to furniture, electrical goods, clothing, jewellery, et al. Like the buildings insurance stipulations outlined above, there will be a list of items this DOESN’T run to, mainly comprising of general wear and tear of any items, damage to a computer caused by a virus and any structural repairs which need doing.
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Also worth noting that a large percentage of home contents packages have a single limit restriction in place, typically set in the region of £1,500. So if you’ve got any specific items of value (monetarily or sentimentally), then it’s worth the policyholder’s while to arrange extra cover to ensure they are safeguarded for future eventualities too.
Given the likelihood of burglaries and damage caused by adverse weather conditions, rubber stamping a decent home contents insurance plan is always something we’d advise, especially when learning that the average home harbours contents of a value knocking on for £45,000. Contrast this with the average home contents policy premium of just over £100 annually and you soon begin to appreciate the significance.
Similar to buildings insurance, there are naturally pros and cons, and we wouldn’t be doing our job properly if we weren’t to tell you what the mains ones were with direct regards to home contents policies. Advantages include the range of optional extras which the policyholder can choose from the off, including ‘personal possessions’ cover (which means your mobile/wearable tech and jewellery will be covered when you’re out and about as well as at home), access to legal advice, adopting a ‘new for old’ plan when it comes to replacing lost or damaged belongings and the opportunity to select ‘emergency home cover’ which puts you in contact with tradespeople if and when burst pipes and other unseen situations arise out of the blue.
Potential pitfalls include the need to fork out for an excess (which will obviously increase should any claims be lodged during the term of the plan) and understanding that many policies put a cap on the maximum cover/subsequent claim amount, which you need to ascertain early doors so you know where you stand on certain issues.
‘Sum insured’ is the most popular home contents policy (‘bedroom rated’ and ‘unlimited sum insured’ being the other two choices), which requires the homeowner/tenant to work out exactly how much their personal possession would cost to replace at the point of contractual agreement. Thankfully, there is a raft of online contents calculators which help you determine individual current market values of items to make things that little bit easier/more convenient. But this often throws up problems for some people, who unwittingly either overestimate the value or conversely (yet equally damagingly) under-calculate values. Insist on too much cover, and you essentially will pay over the odds for premiums, go the other way and risk a glaring shortfall on any subsequent home contents insurance pay-outs should a claim be successful somewhere down the line. A difference the policyholder would have to make fiscal amends for.
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