Home Insurance

Contents insurance

Friday, 27 March 2009 By Seamour Rathore
seamour.rathore@consumerchoices.co.uk

Don’t get caught short with inadequate or no home contents insurance - your possessions are probably worth thousands of pounds and should be protected.

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Given the sheer amount of possessions in our homes, it’s important to make sure we have adequate insurance cover. It’s all too easy to make a rough guess at how much our stuff is worth and then find ourselves out of pocket if we need to make a claim.

There is a real risk of being underinsured when it comes to contents insurance. Just over half the people in a recent survey had reviewed their home insurance in the last year to make sure it fully protected the contents of their homes, garages, sheds and gardens. More worryingly, only 74% of the people interviewed were confident that their contents cover was actually enough to cover the value of their possessions*.

In the case of a fire, for example, you may need to replace everything from the food in your freezer to the entire contents of your lounge including furniture, carpets, curtains, TVs and laptop.

And even if you are renting your home and the landlord handles the building insurance, you should still insure your contents.

In this guide we will look at what contents insurance covers and how to ensure you get the right cover at a price that’s affordable.

• What is home contents insurance?
• What else does contents insurance cover?
• Do I need additional contents cover?
• Things to look out for
• How to get the best deal on contents insurance

What is home contents insurance?

Contents insurance provides financial compensation if items in your home are damaged or stolen. It usually covers damage caused by fires, storm, floods, water damage and vandalism.

Items covered by your contents insurance will usually include your furniture, carpets, books, curtains, valuables (up to a specified amount), cash (up to a specified amount), garden plants and the contents of your fridge and freezer.

Policies also cover CDs and DVDs, and these days many also cover downloaded music and films, too. If you are a big fan of downloading then this is definitely something worth checking..

Most policies offer new-for-old cover, ie your insurance covers the full replacement cost for new items. So even if your three piece suite is three years old, your insurance should cover the cost of a brand new replacement. The alternative is indemnity cover – which gives you the replacement cost of the item as it was, including wear and tear – ie you will be given a sum to purchase a three-year-old carpet to replace your three-year-old carpet.

The most important thing you must do when you buy contents cover is have an accurate idea of the value of the contents of your home. In the case of a fire, for example, you may need to replace everything from your “Welcome mat” to the food in your freezer.

To work out how much your possessions are worth in total, you should take an inventory of everything, room by room. Some insurers provide a handy checklist which you print out and fill-in with your details. Keep receipts (especially for expensive items) and note down when you got items, too. This is all useful information for your insurer if you have to make a claim.

NFU Mutual has an online home contents calculator which helps you check whether you have adequate contents insurance cover.

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What else does contents insurance cover?

Contents insurance will also cover the cost of accommodation if you have to move out of your home, for example as a result of flood or fire.

And it normally includes as standard cover for accidental damage to fragile items such as stereos and computer equipment.

It will often cover items such as house keys, and other personal possessions you may take with you when you go out. Importantly, many policies cover students’ belongings when they are away during term.

Expensive items of jewellery, antiques or art and other unusual objects will only be covered up to a certain limit individually. So for some high value items you will need to take out extra insurance – either as an add-on to your general contents insurance or as an extra.

If you have a large collection of something specific (like DVDs or stamps) or expensive home entertainment equipment, such as computers, widescreen TVs and games consoles, you should also consider listing these as individual items on your policy or insuring them separately.

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Do I need additional cover?

There are various other instances for which you may also want insurance cover. Depending on your insurer, some of them may be automatically included in your policy, but you will need to do the research and compare policies. Even if these extras are not included as standard – you should be able to add them at additional cost.

Extras that may or may not be included are:

• Additional accidental damage cover for breakables, eg vases and ornaments. This can also be extended to cover DIY disasters – the most common DIY claim is for spilling paint on fitted carpets.
• Cover for personal possessions also known as “all risks”. This insures you for things that you may take out of the house with you such as bicycles, watches, phones, MP3 players and jewellery. It covers your possessions to and from work, on trips and on holiday. But in the case of holidays, remember you still need travel insurance to cover yourself in the case of illness or accident, among other things.
• Legal assistance costs up to a fixed level in order to consult legal professionals on your rights in situations which might include disputes relating to employment, goods or services and property. It may also include help to defend motoring prosecutions, problems with your tax liabilities, and loss of income from jury service if there’s nowhere else you can recover it from. It may also help you with legal costs arising from injuries in an accident that isn’t your fault.
• Costs to cover home emergencies such as plumbing, heating and drainage problems and vermin infestation. The cover will be capped at a certain sum ie £200 or £500 to cover both labour and materials.
• Credit card fraud protection – compensation for financial loss if your card is lost or stolen and someone makes fraudulent purchases on it.

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Things to look out for

You should make sure you review your home insurance policy if you alter or extend your home – you may find that you are underinsured on your contents as a result. Also don’t forget any items in the garden, shed or garage which should be included when you calculate the extent of the cover you need.

Make sure that you have the types of locks and security measures specified in your home contents policy or you may find that the policy will not pay out if you have a problem.

Bear in mind that clothes and linen are often excluded from new-for-old cover and you will get compensation depending on their current price, including wear and tear instead.

If there is a problem and one item in a set of things – one part of a three piece suite, for example - is damaged, your policy will specify whether it will only replace the damaged part of the set or the whole set.

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How to get the best deal on contents insurance

While it’s important not to be underinsured on your household contents, there are ways to save money on cover.

• Bundle it with buildings insurance for extra savings
• Build up a several years’ no claims bonus – try not to claim for minor problems as this will bring your premium down
• Buy online – there are good discounts available
• Pay your premium as an annual lump sum rather than by monthly direct debit
• Understand whether your premium has been worked out on a sum-insured basis or a number of bedrooms basis. For “sum-insured” cover you establish how much cover you need. Bedroom-based insurance will offer a level of cover depending on the size of your house – ie how many bedrooms it has.
• It will depend on individual circumstances which type of cover you should get, so do your research and examine several insurers’ policies so you get the deal that’s correct for you.

* NFU Mutual/YouGov research among 2059 UK adults, November 2008