This guide explains how home insurance works, the difference between buildings and contents insurance, and optional add-ons to home insurance.
Read on to find out how to get the best home insurance policy at the cheapest price.
Home insurance protects your home and your belongings from a number of risks.
You can make a claim on your home insurance to replace your possessions or repair your property if certain events take place.
There are 2 types of home insurance:
You can buy separate policies for each, or buy a combined buildings and contents policy.
Home insurance is sometimes known as household insurance or homeowner’s insurance.
A combined home insurance policy includes both buildings insurance and contents insurance.
It might be cheaper to buy a combined policy than two separate policies.
You should compare both combined home insurance policies, and separate policies, to get the best home insurance deal.
Contents insurance covers the cost of replacing or repairing your possessions if they are damaged, destroyed or stolen.
It covers everything you would take with you if you moved home.
This might include:
Contents insurance is usually sold on a “new for old” basis. This means if an item is destroyed or lost, the policy will pay for a new one. This is the most popular type of cover.
Some insurers offer cheaper indemnity policies that take into account wear and tear and pay out based on an item’s current value.
When you take out contents insurance, you’ll need to calculate how much your possessions are worth in total. This is known as the sum insured.
If you are underinsured your insurer may only pay a proportion of your claim.
Buildings insurance protects you against the cost of repairing or rebuilding your home if it is damaged or destroyed.
It covers the structure of your home, such as the roof, walls and windows. It also covers permanent fixtures and fittings, such as kitchen units and bathroom suites.
Buildings insurance protects you against damage caused by:
weather such as rain and storms
falling trees or branches
burst or frozen pipes
fire or explosion
theft and vandalism
car and lorry collisions
oil leaking from your heating system
When you take out buildings insurance, you’ll need to know your property’s rebuild cost.
This is the amount it would cost to completely rebuild your home, including labour and materials, if it was completely destroyed.
The rebuild cost is usually lower than your home's sale price or market value.
It’s important for the rebuild cost to be accurate. If it’s too high, you’ll be paying more than necessary for your home insurance. If it’s too low, you’ll be under insured.
You can calculate your home’s rebuild cost using the Association of British Insurer’s Residential Rebuilding Costs calculator.
If you have a mortgage, buildings insurance is likely to be compulsory. This is because the mortgage lender needs to know its security (i.e. your home) is adequately protected.
However, you don’t need to buy buildings insurance from your mortgage lender or via your mortgage broker. You are free to shop around and buy your own policy.
If you live in a leasehold flat, the buildings insurance for the whole building will probably be organised by your freeholder.
If your flat is share-of-freehold, you and the other leaseholders are collectively responsible for making sure the building is insured.
If you live in a flat you will need to arrange your own contents cover separately.
If you’re a tenant, it’s up to your landlord to arrange buildings insurance. However, you will need your own contents cover.
If you’re a buy-to-let landlord you’ll need specialised landlord buildings insurance. It is optional to buy contents insurance for any contents you own in the rental property (furniture, for example).
If you’re a student at university you can either buy student contents insurance or add your contents onto your parents’ home insurance policy.
Research by Consumer Intelligence found the average cost of combined buildings and contents insurance in 2020 is about £151.
If your buildings insurance is paid by your freeholder or landlord, so you just need to buy contents insurance, it will be much cheaper.
The average contents policy costs about £59, according to the Money Advice Service.
There are a number of variables that affect how much your home insurance premium will be, with the type and size of your property being a key factor.
According to Consumer Intelligence, the most expensive properties to insure are Victorian-era properties built between 1850 and 1895, followed by properties constructed between 1925 and 1940.
Other factors that will impact the premium you pay include:
the size of property
the cost to totally rebuild your home
how many people live in the property
whether the property is normally inhabited during the day and at night
where in the UK you live
crime rates in your area
security measures installed such as door and window locks
whether you have a burglar alarm or belong to a Neighbourhood Watch scheme
the total value of your possessions
how many items you own that are worth more than £1,000
any extra cover you add to your policy
There are a number of optional extras you can add to your home insurance policy for an extra cost.
Home emergency typically covers you for issues with your boiler and central heating, plumbing, electrics, and household security. Some policies offer cover for pest infestations and roof damage.
Accidental damage covers mishaps by you or other people in your household that cause sudden and unexpected damage to your property or possessions. For instance, spilling wine on the sofa, smashing the TV, or drilling through a pipe.
Personal possessions insurance covers your personal belongings against loss, damage, and theft when you take them outside your home. Items are normally covered up to per-item limits.
Legal expenses cover includes legal representation for various legal proceedings such as those regarding employment, death, medical negligence, or personal injury.
If you’ve not made a claim on your home insurance for a number of years you can earn a no claims discount which will make your next policy cheaper. You can pay to protect this discount in the event of a claim.
Your bike might be covered under your normal home insurance while it’s in your home but you might have to pay extra to cover it away from the home. Expensive bikes will also need to be added to your policy.
This will cover loss of music, films and other files downloaded to a computer, laptop, mp3 player, or smartphone.
This will cover garden furniture and plants, and items stored in locked sheds and outbuildings.
You should shop around for the best home insurance policy, and compare premiums and the level of cover.
You can get home insurance quotes directly from insurers, online or on the phone, or via price comparison websites.
To get a quote, you’ll need the following information to hand:
the date your property was built
the date you bought the property or moved in
the rebuild cost of your property (for buildings insurance)
the total value of your personal possessions (for contents insurance)
details of the type of locks and alarms you have
details of your property’s construction and roof type
details of any previous claims
information about any criminal convictions you have
Make sure you carry out a home insurance comparison each year at renewal time. You can do this by getting quotes from individual insurers or using a price comparison site.
Some insurers will auto-renew your policy if you don’t tell them not to. It’s best not to do this – insurers rely on consumers’ apathy to sneak in price hikes at renewal time. You’ll be better off shopping around for the cheapest policy every year.
If you need both contents and buildings insurance, you’ll probably pay less if you buy both from the same provider, rather than buying separate policies.
Adding extra security to your home can reduce the price of your insurance. Decent locks, burglar alarms and wi-fi-enabled smart security devices can pay for themselves in reduced premiums.
Most insurers give you the option of paying for home insurance annually or monthly. If you opt to pay in monthly instalments, you are likely to be charged interest on top.
It might not be worth making low value claims on your home insurance as you’ll lose any no claims bonus and will pay more at renewal time. Another option is to pay to protect your no claims discount.
The excess is the amount you’ll pay towards a claim. Each policy will come with a compulsory excess but you can also add a voluntary excess. The higher your total excess, the lower your premium will be.
Some home insurance comes with a free gift such as a gadget or vouchers. Don’t be too influenced by these – work out how much the gift is worth and factor it into your cost comparison before you buy a policy.
Every home insurance policy has things it won’t cover. These are called “exclusions”.
Exclusions vary from policy to policy. Typical exclusions might be:
damage due to wear and tear
damage caused by acts of terrorism
claims if your home is left empty for more than 30 or 60 days
negligence (e.g. if you’re burgled after leaving a door or window open)
claims if you have wrongly described locks and security systems
claims due to having a lodger in your home
any amounts over the sum insured (for contents insurance) or the rebuild cost (for buildings insurance)
the full value of items worth more than the policy’s “single item limit”
theft of bikes outside the home if the bike wasn’t secured to an immovable object
cars or vehicles in a garage (car insurance will cover this)