Your property is likely your most expensive and valuable asset. Insuring it should the worst happen is one of the most sensible and prudent steps you can take. The hard-earned contents of your home, both as a homeowner and a tenant, should also be protected against loss and damage. When taking out an insurance policy as a landlord or homeowner, you will be asked if you would like buildings insurance, contents insurance or both but calculating figures for these types of insurance can be a confusing process – how do you know how much it would cost to rebuild your home in the event of total loss, for example? If all the contents had to be replaced, would you know how much it would cost to replace everything? In this article, we look at buildings and home contents insurance and how to calculate the amount of cover you need.
What Is Buildings Insurance?
Buildings insurance covers the cost of loss or damage to your property (not the contents inside, such as carpets etc) in the event of such things as fire, flood, subsidence (as long as this is the first time), and vandalism. In essence, the cost to repair or rebuild your property in the occurrence of unforeseen circumstances. Your policy provider will give a full list of events that would be covered. Alongside this, they will also provide details of what will be covered on your property such as pipes, gutters, fences, garages and outbuildings.
Do I Need It?
Absolutely, yes! Even though it is not a legal requirement to have, taking out building’s insurance will likely be insisted upon by your mortgage lender in order to protect their asset. And, as your most valuable asset, you should also have the same desire. Not being insured in the event of a flood, for example, could see everything you have worked for get literally washed away.
How Do I Calculate it?
Calculating the cost of rebuilding your home should not, in any way, be a guess. Leaving this part to the experts is a most prudent decision when taking out this type of insurance. There are two possible options here, either:
- Employ the services of a surveyor to give you an estimate of the rebuilding cost or:-
- Use the Association of British Insurers (ABI) rebuilding cost calculator. This can be found by clicking here. You will need to register (free) and enter data for your property in order to arrive at a rebuild figure.
What Is Home Contents Insurance?
Coming home to a flooded home after a holiday or to find a burglary has taken place and many of your most precious possessions are gone can be extremely distressing, not to mention incredibly expensive if you do not have insurance cover. Home contents insurance will cover your personal belongings in your home in the event of theft, damage or total loss. You will need to make sure you have included the cost of everything in your home, such as carpets, curtains, clothing…everything, even the proverbial kitchen sink (actually the sink is a fixed part of your home and so is usually covered under your building’s insurance rather than contents). The contents of the shed and garage will also need to be covered.
Do I Need It?
As with buildings insurance, there is no legal requirement to have contents insurance but unless you have the funds available to replace everything you own, it’s a very sensible idea to have it.
How Do I Calculate It?
This calculation is one that you can do for yourself but it’s very important not to guess at the value of your items – you could possibly undervalue what you own and therefore not have the right amount of cover, should you need to make a claim. You could also end up over-valuing items and pay a higher premium unnecessarily. Here are some tips on how to come up with an accurate list.
- Looking at your contents, go room by room when compiling your list – e.g., the list for the living room might include things such as the carpets, sofas, TV and ornaments etc.
- Beside each item, you will need to enter the cost to replace the item. Try to arrive at a figure for each item based upon what it would cost to replace an item at today’s prices, rather than what you paid for the item many years ago. An on-line search will help you with this. For items that are no longer available, compare prices with comparable current items.
- Check with several retailers to ensure you have the correct average cost per item.
- Total up each room and combine to get overall contents cover amount.
- Remember that you will have lots of smaller items in your home which will add significantly to the overall figure that you need to be insured for. Don’t forget these when calculating your insurance valuation.
- When looking for cover, check what is insured and the limits to make sure it is the right policy for you. An example, some insurance policies only cover tools to the value of £250 – that doesn’t go far if you are avid DIYer
We all hope to never have to make a claim on our insurance policy, but should the worst happen, having adequate cover will give you peace of mind at a likely incredibly stressful and difficult time. The contents of this article are generalised and should not be relied upon. For financial matters it is recommended to seek expert advice.