Buildings insurance – how much cover do you need?

P3The key to buying buildings insurance is to get the right type and level of cover, and to make sure you answer truthfully and accurately when your insurance company asks if there’s anything unusual about your home. If you miss something important, a future claim could be rejected.

Types of buildings insurance

  • Bedroom-rated
  • Sum insured

Bedroom-rated insurance

Over half of all buildings insurance policies these days are bedroom-rated. The advantage is that the insurance company estimates the cost of rebuilding your home based on the number of bedrooms, and they provide a very high sum insured to protect you against under-insurance. Almost half of these policies have a sum insured of £250,000 or more.
You should still check that the sum insured is sufficient for your needs, by using a recent survey of your home.
Sum insured insurance

You calculate the cost of rebuilding your home. This is the ‘sum insured’.
The sum insured is the cost of rebuilding from scratch – it’s not the same as your home’s market value , which might be higher or lower.
You should use a chartered surveyor to calculate the sum insured, unless you know a lot about building materials and building requirements yourself.
The cost of rebuilding your property will increase over the years, so index-linked policies are best – they update the sum insured to reflect the changing cost of rebuilding. Even so, you may want to have a new survey every few years.
To get a rough idea of what your property might cost to rebuild, use this calculator from the Association of British Insurers (ABI):

Which is right for you?

The choice often comes down to cost versus convenience.

Bedroom-rated insurance is straightforward and you don’t need to worry about not being adequately covered, but you might end up paying more than you need to.
Sum insured insurance is tricky to calculate, but it means you only pay for the cover you need.
Things to check for when comparing policies

  • Index-linked cover. Will the amount of cover increase to meet the increasing cost of building materials?
  • Unlimited sum insured. With a lot of insurers nowadays, and especially when buying online, the sum insured is set very high and your premiums will be fixed so you won’t be able to reduce the sum insured to get a cheaper premium.
  • Alternative accommodation. Will the insurance pay for you to live somewhere else if you can’t live in your house after it’s damaged – for example by a fire or a flood?
  • Excess. How much will you need to pay yourself if you make a claim?
  • Escape of water. Are you covered for damage from burst pipes or water tanks
  • Home Emergency Service. Some policies include cover for heating and plumbing repairs along with other home emergencies as part of their standard policy. For others it’s an optional extra for an average price of £41. Shop around because policies vary widely.
  • No claims discount. Will you pay less on your premiums if you’ve gone for a while without making a claim?
  • Repair guarantee. Are you covered for faulty repairs (if they’re carried out by a company your insurer approves)?

Different insurers will provide different levels of cover in their policies. So keep an eye out for where the differences lie and make sure you get the cover that you need.
These might count as non-standard construction properties:

  • Timber-framed or timber-clad houses
  • Listed buildings
  • Flats in blocks built out of concrete or with more than five floors
  • Houses with flat or thatched roofs

Fortunately, there are lots of insurance providers that will insure non-standard properties – it just means giving a lot more details about your property. Try searching online for ‘non-standard construction insurance’ or contact an insurance broker who may have access to more non-standard policies.

Don’t be tempted not to tell the insurance company about your home’s non-standard construction or fail to disclose something the insurer asks you about. If you need to claim, you won’t be covered if you didn’t take reasonable care to answer all the questions truthfully and accurately when you applied for the policy.

Keeping your policy up to date

Keeping your policy up to date makes sure you have enough cover – for example, if you add a conservatory or an extension, your property will cost more to rebuild.

So long as your policy is index-linked or bedroom-rated with a high sum insured, it should keep up with increases in building material and construction costs over time – check this carefully before you buy.

Contents insurance – choose the right policy and cover

Buying contents insurance? You need to make sure you have got just the right amount of cover – too much cover and you are paying more than you need, too little and your insurance company might not pay out if you need to claim.

Types of contents insurance policies

There are three types of policies available in the market:

  • ‘Bedroom rated’ –The insurer works out the amount of contents cover (or ‘sum insured’) based on the number of bedrooms you have. The advantage to this type of policy is that you don’t have to work out how much insurance you need. Most policies which are bedroom-rated provide between £40,000 and £50,000 of cover as standard which is usually enough for most houses.
  • ‘Sum insured’ – You have to calculate the amount of contents cover you need.
  • ‘Unlimited sum insured’ – All your contents are covered without limit so you don’t have to worry about being underinsured.

You can decide which type of policy you prefer. However, you need to be aware that if you use a comparison site you will not get a choice – the site will ask you how much contents cover you want and will pick policies which offer this.

What’s the right level of cover?

Remember

Contents insurance covers everything that you would take with you if you moved home.

If you don’t have a ‘bedroom-rated’ policy or ‘unlimited sum insured’ you will need to calculate the amount of cover you need. You can do this in two ways:

  • Use one of the many online contents calculators so you can add up the replacement value of everything you need to cover.
  • List everything that you own and add up what it would cost to replace every item at today’s prices.
  • Be aware that for clothing and household linen – like sheets and towels – the value should be adjusted downwards to take account of wear and tear.

Insuring ‘valuables’

You need to check your insurer’s definition of valuables as this can vary widely. Then you need to check the ‘single article limit’ which is the most the insurer will pay out in the event of a claim. For many contents policies this is around £1,500, (although for some insurers this can be as high as £15,000). So if you have an engagement ring, or a valuable worth more than the single article limit, you need to tell your insurer about it (and you’ll probably pay a bit extra to get it covered).

  • Tell your insurer what high-value items you have
  • Provide proof of purchase (and value) if they ask you
  • Check that they are correctly listed on your policy document
  • Generally, for all other contents the single article limit doesn’t apply.

Insuring mobile phones, MP3 players, laptops, iPads and other portable devices

With some contents policies you’ll be covered for the things you take out of the home such as your phone or your laptop – but you need to check that you have the cover you need.

Your standard cover might include the cost of replacing your mobile phone handset or your laptop, but you’ll need to check whether it covers things like music downloads on your phone or the files you’ve saved on your computer. Some policies include cover for digital information so it’s worth checking.

Most polices won’t cover you if these items break down. And a standard contents policy won’t typically cover any money you lose if someone steals your mobile phone and runs up a huge bill.

Some insurers will offer you an ‘all risks’ option, usually for an additional premium, which will offer wider cover, and include – for example – accidental damage to your things.

Don’t be tempted to underinsure

Get enough cover to replace all your possessions. If not, you could be in for a nasty shock because your insurer can actually reduce the amount they pay out, even if your claim is only for one or two items.

An example

Say your possessions are worth £40,000, but you only insure them for £20,000
You’re burgled and you lose your TV, sound system and two laptops, which are worth a total of £5,000
You then make a claim
As your total contents insurance cover is half what it should have been, your insurer could reduce your total claim payment by half which means you only receive £2,500 for the items you are claiming for.
Types of cover

There are two different kinds of cover available, both of which have an effect on the price of your premium. Look out for:

  • New for old – You’ll get paid what it costs to replace the items (other than clothes, where there’s usually a deduction for wear and tear). Most policies offer this.
  • Indemnity cover – You’ll only get the current value of your possessions so, if your sofa needs replacing at a cost of £2,000, you will only get what the old one is worth which might be £200. Even though your premium will be cheaper, it could be a false economy.

Additional options – These include:

  • Personal possessions cover – which covers things like wallets, jewellery, and laptops that you take outside the home
  • Legal cover to pay for court costs
  • Accidental damage for things like paint spills on your carpet
  • Home emergency cover for plumbing, heating and other emergencies
  • If you work from home check whether cover for business equipment is included as standard or an optional extra. If your ‘home’ work is more substantial than clerical work – for example you have people visiting your home – you will probably need more extensive cover, which you can get from a ‘homeworker’ policy. Speak to your insurer and discuss the type of work you do.

Keeping your contents policy up-to-date

You need to make sure you keep your insurance company up-to-date with your circumstances. So if, for example, you splashed out on some antiques, electronics or jewellery that are worth more than your single item limit on your policy you should let them know.

Likewise, if you’ve made a series of major purchases which means you need to increase the sum insured. For example, if you replaced a lot of the furniture in your home then you might need to increase the total sum insured.

Many standard policies do not insure people who have a lodger, so if you take in a lodger you need to let your insurer know – not disclosing this information could invalidate your policy.