Your essential guide to home insurance

Your home may be your castle, but how do you know if you’re adequately protecting yours, or if you’re paying over the odds for cover?

Under new proposals from the city regulator the Financial Conduct Authority (FCA) existing home and car insurance customers shouldn’t have to pay more for their cover than someone taking out a new policy.

Currently, insurers often increase premiums each time customers renew their policies, whilst offering lower, more competitive quotes to new customers. The regulator wants to see this change, so that existing customers aren’t charged more than new ones. According to the FCA, introducing these proposals could save consumers a massive £3.7 billion over the next decade.

Its plans will now be consulted on until January 2021, so if they do come into effect it won’t be until some time next year. Whatever the outcome of the FCA’s proposals, it’s important not to wait until then to get a better deal on your home insurance. Savings can be significant between new quotes and your renewal quote from your existing provider. If your current cover is soon up for renewal, you can compare quotes and switch online using our home insurance comparison tool.

Whatever happens, make sure you don’t let your insurer automatically renew your cover when your existing policy comes to an end as you’ll almost certainly be able to find a better deal elsewhere. Find out more about auto-renewals in our article Insurance auto-renewal – is it legal?

Here, we explain everything you need to know about home insurance.

How does buildings cover work?

Buildings insurance is a legal requirement if you have a mortgage on your property. As the name suggests, it is designed to protect the four walls (and the roof) around you, rather than the contents of your property. It does however, include any permanent fixtures and fittings, such as your bath, or a fitted kitchen.

Many people wrongly assume that the amount of buildings cover they’ll need is linked to the value of their home. Instead, it’s linked to how much it would cost to actually re-build your property in the event that it is completely destroyed. So, for example, your property might be valued at £400,000, but may only cost £150,000 to re-build, so you would only need £150,000 of buildings cover. This gap can be quite surprising for people, but it’s simply due to a large portion of the value of their house being taken up by the plot of land it’s built on.

If you are interested, you can check the re-build cost of your property using the Association of British Insurers’ cost calculator, which is provided by the Building Cost Information Service (BCIS) of the Royal Institution of Chartered Surveyors (RICS). You can find the calculator here. You must register to use it, but once you’ve done this you can use it up to four times in any 12-month period.

For the purposes of getting an insurance quote, many insurers simply base the amount of buildings cover they’ll offer you on the number of bedrooms you have and the area you live in, so it’s unlikely you will need  to know the exact re-build cost to get a quote.

What won’t my buildings insurance cover?

Buildings insurance is designed to cover unpredictable and unexpected events and not general wear and tear, so the onus is on you to keep your property in a good state of repair.

If, for example, your property suffers water damage after it rains heavily because of missing tiles, your policy may not pay out because the insurer may expect these tiles to have been replaced.

Similarly, if a fence blows over because the posts were rotten, you may find you’re not covered because you didn’t replace them.

Always check the small print of any policy before you buy, so you’re clear on exactly what is and isn’t covered.

How do I work out how much contents cover I need?

Although there’s no legal requirement to have contents insurance, if you don’t have it and are the victim of a burglary, or your property suffers water or fire damage, you might struggle to afford to replace everything you’ve lost.

Contents cover can therefore provide valuable peace of mind that you won’t end up out of pocket should anything go wrong. It’s important to get the amount of cover you need right, or you might end up under-insured. If that does happen and you need to make a big claim, your pay-out will be reduced by the percentage shortfall of cover.

However, thinking about how much everything in your property is worth can feel like a pretty daunting task.

A good starting point is to work out the value of the contents of each room. This can help make things feel more manageable. Remember to include things like clothing and bedding – the cost of these can add up and if the worst should happen you’ll need to be able to replace these and other essentials.

Don’t forget to think about things you keep in any garden outbuildings too, such as bicycles and garden tools, and check the level of cover provided for these items.

You’ll also need to consider whether you have any particularly valuable items, such as jewellery or antiques that you might need additional cover for.

Most contents policies have a ‘single article limit’ which is the maximum the insurer will pay out for any one particular item. Often this limit is around £1,500 (but does vary) so if you have an engagement ring which cost £3,000, you’ll need to notify your insurer and they may need to charge a bit extra to cover this.

Is there anything my contents policy won’t cover?

Most home insurance policies don’t automatically include accidental damage cover, so you may have to pay an additional premium if you want this. As the name suggests, accidental damage cover provides protection if you damage your property or its contents by accident – for example, you might knock a pot of paint onto your carpet, or your child might kick a football into a window and break it.

Adding this type of cover will usually set you back around £20-80 a year, so can be worth having if you tend to have a lot of breakages in your home.

Your home insurance is also unlikely to cover any personal possessions that you take away from home, such as your smartphone. Again, you may be able to add this for an extra premium, and often it can cost less to add it to your home contents policy than by taking out a separate phone insurance policy – the important thing is to check with your insurer so you know where you stand.

How are my premiums worked out?

Insurers calculate their premiums based on a wide range of information, including where you live, what type of property you live in, which security measures you have in place, and whether you’ve previously made a claim on your insurance.

For example, if you live in an area that is at risk of flooding, or that has high crime rates, your premiums are likely to be higher than if you live somewhere that isn’t near a river or the sea, or that has low crime rates.

How big an excess should I choose?

The excess is the part of any insurance claim which you must pay yourself. For example, if you are making a claim to replace a stolen television costing £500 and the excess is £150, you’ll only get £350 back from the insurance company once the excess has been deducted.

There are usually two parts to a home insurance excess, a compulsory part which is a set amount that you must pay, and a voluntary part, the size of which you can decide. If you choose a high voluntary part, this will usually reduce your premiums. However, you must remember to ensure your excess remains affordable, otherwise you could struggle if you have to make a claim.

What can I do to reduce the cost of my home insurance?

There are several things you might be able to do which could potentially reduce the cost of your home insurance premiums.

Getting your home and contents cover from the same provider can sometimes result in a discount, and it’s worth asking even if one isn’t advertised.

If you’re able to, paying your premiums in an annual lump sum will save you money compared to paying them monthly. That’s because you’re usually charged interest on monthly payments which will bump up the cost of cover. The interest rate isn’t always very competitive either, so if you can pay for your policy up-front, you can help keep costs down.

You may also be able to reduce the cost of cover by fitting extra security measures, such as an alarm and additional security locks on windows and doors. Joining your local Neighbourhood Watch scheme may also help.

As previously mentioned, raising your excess can also help keep your premiums down, but make sure it’s at a level that you’re comfortable with and could afford if you needed to submit a claim.

Is there anything that could void my policy?

Yes, be very careful about posting holiday photos on social media which essentially advertise the fact you’re away – this could void your home insurance cover.

According to comparison site MoneySuperMarket, one in four people are unaware that putting a picture up on sites such as Instagram or Facebook while they’re on holiday could invalidate their policy.

This isn’t the only way you can void your cover. If for example, you leave a window open or a door unlocked when you’re out of your property and you’re subsequently burgled, your policy is unlikely to pay out.

You also need to let your insurer know if you’re planning to put your property up for sale, or if you’re planning any renovations. Failure to do so could again invalidate your policy.

There are a wide range of exclusions that you should be aware of, some are consistent from provider to provider, whilst others are more specific to a type of policy. The important thing is to always make sure you check out the small print of your policy quote so you fully understand your obligations and any exclusions.

What if I’m struggling to get insurance?

If there’s been a problem with your property in the past, perhaps for example, it’s flooded, or it’s had subsidence, you might find you’re refused cover by most high street insurers.

However, there are insurance brokers which specialise in finding cover for properties with special requirements, so it’s worth seeking professional help from one of them. The British Insurance Brokers Association (BIBA) can help you find a broker here or you can call them on 0370 950 1790.

Who do I complain to if my insurer won’t pay out?

If you’ve submitted a home insurance claim which has been rejected, and you think your insurer has acted unfairly, you should first make a formal complaint to them and explain why you think their decision is wrong.

If you aren’t satisfied with their response to your complaint, you can take your case to the Financial Ombudsman Service here. They will be able to look into it on your behalf and will try to resolve the issue.

Have you recently saved money on your home insurance or have you had a claim refused? If so, we’d be interested in hearing from you. You can join the conversation on the Rest Less community or leave a comment below.

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