Have you got the right home insurance?

Have you got the correct home insurance cover?
Have you got the correct home insurance cover?

Home insurance is often a legal necessity. Home loan firms insist on cover for the building while you have a mortgage.

But beyond this obligation, you are free to choose as much or as little cover as you think fit.

There’s a bewildering variety of policies on the market. And while shopping around pays dividends, the basic rule remains – the more you choose to insure, the higher your premiums.

Buildings insurance is often bundled with contents cover – which pays out if your furniture was ruined in a fire or flood or your laptop was stolen. But contents is not compulsory.

Buildings insurance is designed to pay out for a complete rebuild if your home is burnt to a cinder. This will be less than the current value as part of your home’s worth is the land. Cover is often sold on a “bedroom” basis, the more you have, the bigger your home and the more you pay.

You can usually buy “accidental damage” as an add-on. This could pay out, for instance, if you smash your windows in a freak occurrence. But watch out for policy exclusions from botched DIY projects.

And remember buildings insurance is cover against the unexpected – not a maintenance contract. You are expected to look after the property – and sort out a roof that’s been leaky for years yourself.

Both buildings and contents cover come cheaper if you can pay the first slice of any claim – called the “excess”. You pay less if you accept the first £1,000 rather than the first £250.

You don’t need buildings insurance if you rent. And if you live in a block of flats as an owner, you could be covered by a policy for the whole building – you may pay for this in the service charge.

But you should still consider buying individual contents cover in case of theft, fire or flood.

The second rule is to only cover what you cannot afford to replace. Five year old computers are virtually worthless – other than the material on the hard disk which is not generally protected by insurance.

Contents policies usually have limits that exclude higher value items. You can insure your bicycle or jewellery without specifying what it is on your home cover but often only to a value of £250 or £500 per single item with an overall limit of perhaps £5,000. The Picasso over your fireplace will not be covered – you may prefer to cover high value items with specialist insurers.

n If you need to get in contact with me please e-mail: Askalex@which.co.uk