Insurance

Most people’s biggest asset is their home and yet almost one in three of the UK’s 25 million households do not have buildings insurance.

According to the Association of British Insurers, six million have not insured the contents of their homes. It might be tempting to skip paying for insurance, but you risk being hit severely in the pocket, so it is wiser to make sure you have the right household insurance in place.

There are two types of household insurance. Buildings insurance basically protects you against damage to the structure of your home while home contents insurance protects you against damage or loss of your possessions.

Both policies cover you against a list of perils for example; fire, subsidence, theft, flood and storm, as well as providing important cover for your legal liabilities as a homeowner and occupier.

You do not have to insure your contents and buildings with the same company. The market is very competitive so it is worth shopping around. Using the same company may help to streamline claims handling if you suffer damage to the building and its contents.

Buildings insurance covers the structure of your home and permanent fixtures and fittings such as your bath and fitted kitchens.

Your garage, greenhouse and garden shed may also be covered, but some policies exclude things like boundary walls, fences and drives, so check the small print carefully.

If you rent, your landlord should sort out the buildings insurance and most leasehold flat owners will find, the freeholder should be responsible.

Buildings insurance should cover the full rebuilding cost of your home. Your property’s market value or Council Tax band valuation is irrelevant. If you don’t already have a figure on your mortgage survey, the cost can be assessed by a member of the Royal Institution of Chartered Surveyors.

The Association of British Insurers publishes a guide to assessing rebuilding costs yourself, but the process is complex and you could get it wrong.

It is your responsibility to get the correct sum insured. Again, if you are under-insured on your buildings cover, your claim may be reduced or rejected, with expensive consequences.

The list of possessions covered by contents insurance includes things like furniture, furnishings, kitchen equipment, electrical goods, clothing and valuables.

Policies offer either “replacement as new”, where the full cost of repairing or replacing lost or damaged items is met by the policy, or “indemnity cover”, where a reduction is made to account for wear, tear and depreciation.

Both policies cover loss or damage to the building and its contents following fire, lightning, explosion, earthquake, theft, storm and flood, and so on.

It is worth following these tips:

· Improving your home security can keep premiums down. You should get a discount if you have installed an approved alarm and special secure locks. Some companies may offer a reduction if you have built up several claim-free years on your insurance policy.

· Premium costs depend on your postcode. If your house is built in an area where subsidence is rife or properties are regularly flooded, you may pay more for buildings insurance while contents insurance will be more expensive in high-crime areas.

· Most homeowners underestimate the value of their household contents by around one-third, leaving themselves dangerously under-insured in case of fire, damage or theft. Go through every room of your home, adding up the cost of replacing your belongings and valuables such as jewellery or antiques.

· If you buy new items, increase your cover. Many insurers request proof of purchase or valuation certificates for valuable items like jewellery or silver.