Home Contents Insurance - The Facts
By Michael challiner
Damage to possessions in your own home is covered by contents insurance, whereas damage to the fabric of the building is covered by buildings insurance. Typically, contents insurance will cover damage resulting from leaking or escaping oil or water, moving objects (like a car crashing into your house), falling trees, subsidence, flooding or storms, vandalism or riots, theft (or damage from attempted theft), earthquake, lightning, explosion or fire.
Normally contents insurance will also cover the following: Your liability under law as the owner of the house. For example if a visitor is injured or has an accident. The cost of storage and accommodation, if you are unable to live in your property due to damage (e.g. flooding, fire etc). Some accidental damage to DVD players, stereo equipment, TVs, computers and glass built into furniture, such as a glass tabletop. Locks and replacement keys and also the charge made by a locksmith to replace or repair keys. Damage to satellite dishes, radio and TV aerials. Replacement of food, due to a freezer breaking down. Cash stolen from your home. Contents stored in outbuildings (the value of this cover varies considerably from policy to policy. You may find there is a lower limit for burglary). And there are plenty of optional extras available. For example, damage caused by an accident.
Standard policies for contents insurance do include some level of cover for accidental damage - for example stereo equipment - but they do not cover accidental damage to furnishings and goods.
If you pay an extra 20 - 100 pounds you can increase your cover to insure a wider range of items, which you may consider worthwhile if you have a young family. However you may think that the cost of additional cover is not cost effective if your household is less active.
Another optional extra could be cover for personal possessions. Cover for personal possessions is sometimes referred to as all risks cover. It offers protection for your possessions when you are away from home, e.g a digital camera or handbag. We recommend that you obtain a list of items which are covered from your insurer, as there maybe restrictions on the items insured.
Legal expenses could be another optional extra. If you need to go to court or defend a claim against you, then the expense you incur will be covered. (This excludes anything related to fraud, repayment of fines and anything to do with criminal activity.) Typically, the cost of legal proceedings will be covered for most employment, consumer, property and personal injury disputes, as well as any award relating to the legal costs of the other party.
Most insurers charge an additional premium for covering legal expenses, although a few still include it as standard with a home insurance policy.
You may also be able to include what is called “downloads insurance”. Fresh concerns have been raised by the introduction of new technology. Imagine someone breaking into your home and stealing your laptop, iPod or mobile phone. Would your policy cover you for replacing software, ring tones, music and films you have downloaded? A survey has shown that half of the insurers questioned included cover for digital downloads as standard.
Cover for downloads include computer and software programs stored on an MP3, laptop, desktop PC, games, films, television programmes, music, ring tones, home entertainment system or mobile phone.
Of course all insurance policies will impose limit on how much you can claim. For example, it will be difficult to recover the full value of stolen cash and the cost of frozen food should your freezer break down. It is advisable to check your policy to ensure that items of high value are adequately covered.
The situations where your insurance will not payout are called “exclusions”. For example, you need to be particularly vigilant if you work from home, as any liability arising from trade or business is excluded from most policies.
Other common exclusions you need to be aware of include: claims resulting from theft if you sub-let or let your home, unless there has been forced entry; damage occurring when your property has been unoccupied for a specific number of days - burst pipes are a typical example; and the replacement of an entire set (maybe of units or furniture) if only a single item of the set is damaged (you will normally receive reimbursement for replacing the damaged item).
Many exclusions are common between policies but often there are some variations. Therefore, we suggest that you read the small print to ensure the policy offers the cover you require and that you are aware of your responsibilities (like the locking of windows and doors when leaving the house).
And what about new-for-old versus indemnity policies? Indemnity policies deduct a sum for depreciation and wear and tear, thus reducing the amount you receive. On the other hand, with new-for-old cover, you will be reimbursed for the full cost of repairing damaged items or replacing destroyed or stolen items with equivalent new articles.
Although new-for-old cover maybe more expensive than an indemnity policy, we would not recommend the latter, as you may find yourself badly out of pocket when you come to make a large claim with this type of policy.
And finally, what about bedroom-rated versus sum-insured policies? There are two ways you can choose your level of cover. A bedroom-rated policy takes into account the number of bedrooms you have. (this type of cover is often restricted to a maximum amount). The alternative is a sum-insured policy where you calculate the cover you need and your premium is worked out by the insurer based on this amount. We recommend that you obtain quotes for both types of cover, as it is seldom obvious which type of policy offers the best deal.
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