While we may talk about home insurance as if it’s a singular thing, in reality it is made up of two distinct forms of insurance.
There is buildings insurance and then there is contents insurance. You can arrange them together or go for separate policies for each, but it’s important to be clear about why they are different and precisely what each insurance covers.
What is buildings insurance?
Buildings insurance is a policy that offers protection for the building itself; you can claim on it if there is damage to your walls, floors or permanent fixtures and fittings for example.
Does everybody need buildings insurance?
If you are a freeholder, then you will need buildings insurance. The cost of repairing structural damage can be enormous, while mortgage lenders will generally demand that you have some form of buildings insurance in place as a condition of the loan.
The amount of buildings insurance cover you need will be based on the rebuild costs of the property, i.e. the amount to fully rebuild your buildings plus professional fees, rather than its actual market value. This is an important distinction to ensure that your home is not underinsured.
To do this, you could use the Building Cost Information Service’s cost calculator on the Association of British Insurers’ website. Alternatively, you could hire a chartered surveyor to carry out the calculations. You can find one through the Royal Institution of Chartered Surveyors.
It’s slightly different if you are a tenant or leaseholder though. In these instances, it is the duty of the landlord or freeholder to arrange buildings insurance - your own concern will be the contents of the property, rather than the structure itself.
What is contents insurance?
As the name suggests, contents insurance covers the belongings you keep in your property. This is basically anything that isn’t a part of the building itself and you can carry out, so everything from your curtains to your clothes. In fact, your policy may even cover the contents of your freezer.
Does everybody need contents insurance?
Contents insurance isn’t a legal requirement, but without it, you’d have to meet the costs of replacing all of your belongings in the event that they are stolen or damaged, which can easily run into thousands of pounds.
It can be very easy to underestimate how much contents cover you need, which can be problematic should you need to make a claim. It’s a good idea to go through each room of your house to tally up exactly how much it would cost to replace each of your belongings, in order to ensure you have the right level of cover.
Mix and match
When you need both buildings and contents cover, you have a couple of options. The most straightforward is to get a combined policy with the same insurer. That way you only have one renewal to worry about and one insurer to correspond with.
However, you can mix and match, getting buildings cover with one insurer and contents cover with another. Whatever you decide to do, make sure you do your homework and choose the best policy for your circumstances.