Should I Take Out Buildings and Contents Insurance?

Buildings and contents insurance, also known as home or house insurance, is a cover that can be taken out to cover the cost of damages and loss within your home. As a homeowner, you are likely to prioritise home insurance by way ensuring that what's likely to be your largest investment is covered from a range of risks.

Buildings and contents insurance is an additional cost and many home buyers will try to save money wherever possible. The following article explains whether home insurance is worth the cost and what you should expect from your policy and cover.

What is the difference between buildings insurance and contents cover?

Buildings and contents insurance can be bought as separate types of cover or in one policy. Some buyers will only need contents cover (namely tenants and those who don't own the building that they live in) and landlords will likely only insure the building and not the contents of their property if they don't live in it.

Buildings cover covers the bricks and mortar of the property along with some fixtures and fittings. This cover is the insurance that will be used to rebuild the property if it is completely destroyed. Likewise, it is usually your buildings insurance that you will claim from if you damage your carpet, your house floods and the floor or ceiling is damaged, your property is vandalised, fire or smoke damage, subsidence and much more. Your policy document will detail every area and event that is covered.

Contents insurance covers the contents of your home, including furniture, clothing, electrical appliances and jewellery. Depending on your cover, you may also be able to include expensive personal possessions that you take outside of your home, such as watches, jewellery and designer bags.

Do I need buildings insurance?

When you buy a house using a mortgage, you will usually find that the mortgage lender insists that you take out life insurance and buildings insurance. This means that if you were to die, the lender can be assured that they won't lose the money that they have lent to you. Likewise, if your whole house was to burn down, your buildings insurance would ensure that the property was rebuilt and the lender's investment would be secure.

Moreover, the cost of a house is likely to be the biggest expense that anyone has in their lifetime. Buildings insurance protects that expense and ensures that if the worst should happen, you will not be left without a home or any money to replace it.

If I rent my property, should I take buildings insurance out?

You won't need to buy buildings insurance if you rent your property, because this will be the responsibility of your landlord. Some landlords will charge fees that will cover the cost of the buildings insurance but it will be up to them to take out the cover and to make any claims if necessary.

However, as a tenant, it will be your responsibility to protect the contents of your home.

What is covered by contents insurance?

Most insurance providers will offer a basic level of cover as standard for their contents policies and this will include cover against theft, damage from floods and fire.

You will then usually be offered the option to increase your insurance options by adding additional benefits such as ‘accidental damage'. This type of cover would mean that your policy would pay out if you accidentally damaged any of your possessions such as spilling a drink on the laptop or knocking the TV off its stand.

Contents insurance will not cover wear and tear or ageing of your possessions. You will also not be able to make a claim for laptops, tablets or computers that are broken because of a virus.

Should I cover my most expensive possessions separately?

Most contents insurance policies will cover you for all of your belongings with a single item value limit of £1,500. You will have to tell the insurance company how much cover you need and this is done by calculating how much it would cost to replace all of your possessions.

However, if you have any single items that have a value higher than £1,500, you will likely need to add these as a named personal possession in your policy to ensure that they are covered. This will increase your monthly premium slightly, but without having named personal possessions, you will only be able to claim a maximum of £1,500 (or whatever sum the insurer sets) per item.

Will I need to prove that I owned what I owned?

If you put in a claim on your contents cover, you may be asked by the insurance company to give proof of ownership. This can be done in a number of ways, including:

For damaged items, the insurer may ask you to send the damaged goods to them, to obtain a quote for repairs from up to three professionals or may send a loss adjuster to you to review your claim.
For a claim on a personal possession item, it is highly likely that the insurer will request proof of ownership and value prior to paying out. This may be done at the time of taking out the policy or only if a claim is made. It will therefore be essential to obtain a professional valuation of your item and keep any relevant receipts.

In some cases, the insurance company will make a payment in good faith. For example, if you make a claim for a microwave that has been knocked of the worktop, the insurer may deem it likely for you to own such an appliance without needing to see proof of purchase.

Will I be given replacements or money if I make a claim?

In the vast majority of cases, an insurance company will pay claimants for losses by cheque or bank transfer and use the ‘new for old' calculations. This means that the insurance company will not give you the original purchase cost of the item that you need to replace but will rather pay you enough to replace the item with a current model.

In some cases, insurance companies have relationships with manufacturers and suppliers and they will replace appliances and other items directly though this is not standard practice. The ways in which you will be paid will be clearly outlined in the quotation package that you receive from the provider prior to purchase.

Do I need to take out contents insurance?

Contents cover is a more optional insurance in that your mortgage lender won't demand that you have it. That said, if the unexpected occurs, it is very beneficial to have this type of cover in place as replacing one or all of your possessions can be costly.

The Association of British Insurers suggests that in 2018, the average value of the contents of a home was £35,000. Most contents policies for this amount of cover are around £150 per year, with an excess of £250. This means that you will only have to pay £250 to replace a dropped laptop or the whole contents of your house after a fire, if ever you were in this unfortunate position.