Insurance is one of the bigger costs of managing a home, and can set you back thousands of pounds a year. However, if you do your research, you can probably cut your bills sharply - and ensure you don't end up with a nasty surprise when trying to claim
There are two types of insurance for your home:
Building insurance is not legally mandatory
However, most mortgage lenders insist you have buildings insurance so that if your home is damaged they are not left without collateral for the loan
Contents insurance is neither legally mandatory, nor required by mortgage companies
If your property is freehold, the homeowner is responsible for all insurance
If you are in a leasehold property, then the freeholder is invariably responsible for the buildings insurance, and the leaseholders are responsible for the contents insurance
For almost everyone, their home is by far most valuable thing they own, and it has taken their working lives to save up for. If your house caught fire and you aren't insured, you could watch everything you own go up in smoke, literally
Without buildings insurance you will probably not be able to afford to rebuild the house, and despite not having anywhere to live, you would still have to repay your mortgage
There is a less clear cut case for contents insurance. If you don't have many valuable possessions (for example, if you have just left home), or if you are sure you can easily afford to replace your possessions, then it may well be a waste of money.
Many people are over insured, paying out insurance that makes no financial sense. In general, if you can easily afford to replace something, don't bother insuring it
However, if you have valuable contents (in particular, jewellery, paintings or furniture), or if you can't afford to replace the contents, then it will be worth having contents insurance. It will certainly give you peace of mind if you are worried about burglaries or fires.
All insurance policies are different, and so you need to look at the small print to see what is covered. But in general:
Building insurance covers the actual structure of the property including the floors, painted walls, and fixtures and fittings
Fixtures and fittings are things like radiators, baths and shower heads that, if you turned the house upside-down and shook, would not fall out
A standard building insurance policy will cover you for fire, wind, hail, explosion, vehicles or aircraft crashing into your home, smoke, and damage caused by criminal activity including vandalism and rioting - particularly useful in London since August 2011. It will often also cover damage from burst pipes
Buildings insurance will also normally cover you for subsidence, provided that your property has not experienced subsidence before.
The building insurance policy will pay for the repair or rebuilding of your home (be aware that the cost of rebuilding your home in accordance with the current building regulations is different to the valuation of your home)
Contents insurance covers all the stuff inside your home: laptops, electrical goods, white goods, furniture, jewellery, pictures, and so on. Sometimes the policies also cover bicycles and phones
Contents insurance normally covers fire damage and burglary. It can also cover accidental damage, and even theft of things such as jewellery when you are away from home.
Contents insurance can either pay for replacement on a "new for old" basis (e.g. it will pay for a new TV, even though an old TV was stolen), or just at the market value of your things (which is generally a lot lower)
Some properties can be difficult to get insurance for, as they are not normally covered by mainstream insurers. You may end up having to go to a specialist insurer, which could cost you more. However, no property is uninsurable - it might just cost you more. Properties that can be difficult to insure include:
You are usually responsible for the property as soon as the contracts are exchanged, though these are legally murky waters and the situation will vary from contract to contract
Most mortgage lenders will insist you already have buildings insurance in place by exchange of contracts
Premiums depend on a number of factors including but not limited to:
You can have a surveyor give you a "rebuilding cost estimate"
You can use the Association of British Insurers rebuilding cost calculator.
The best way to do this is a bit of a hassle, but it is necessary:
Go through your house room by room and estimate how much it would cost to replace every single bit of furniture and electrical good, including white goods and gadgets
Do the same for books, CDs, DVDs, clothes, shoes, and sporting equipment
If you have particularly valuable paintings, silver, jewellery or antiques consider having them professionally valued
Add it all up together. For higher value items it may be worth taking photographs for reference.
Definitely, and for two reasons:
o You should speak to at least three insurers - and more if you can bear it. Do use price comparison websites, but don't rely on them - you need to talk direct to insurers.
There are a vast number of policies out there, and the choice of them can be daunting:
Most importantly, read the small print
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