How much home insurance do you need?
When insuring your home it's important to establish the value of both the contents and the property itself. This can be a time-consuming task, but consider the impact of being under-insured should you need to make a claim.
There are several insurance products available and each policy will have differing criteria and claims processes. When choosing home insurance compare policies and take time to ensure that you choose a product that meets the needs of you and your family.
Buildings and Contents Insurance
If you own your home you will need to have buildings insurance. This covers the cost of rebuilding your property if it is damaged by, for example, a fire or natural disaster. Taking out a buildings insurance policy is usually a requirement of your mortgage loan. Buildings insurance also covers permanent fixtures within your home, such as the kitchen and bathroom and some policies cover outbuildings.
Contents insurance covers the value of possessions kept in the property. This insurance is not compulsory, but the cost of the monthly premium is usually worthwhile when considered against the cost of replacing stolen or damaged items. Contents insurance covers everything in your home, including furniture, electronics, tools, clothing, jewellery and art.
Calculating Value
When determining the level of buildings insurance you require it's important to remember that the insurance company requires the rebuild value and not the market value of the property. Surveyors often use the Building Cost Information Service to calculate the required level of cover. You can visit their website and enter your property details into the calculator, which will generate a report page and estimate of the cost to rebuild.
To determine the level of contents insurance needed you could make a list of everything that's in each room of your home and then assign a value to each item. Remember to include gifts and appliances as well as things you can take out of the home, such as your mobile phone. Consider whether you have valuable software installed on your home computer as this can also be included in your contents insurance.
If you have any items that are markedly valuable in their own right check the terms of the policy you are considering. Some insurers will request that high-value items be listed and covered individually.
Try to be as thorough and accurate as possible. Undervaluing the cost of your possessions could leave you out of pocket if you need to make a claim and over-insuring could lead to a higher monthly premium.