Home Insurance and Your Peace of Mind

In a perfect world there might not be a need for home insurance.  But unfortunately, bad things do happen to good people, even in the UK.  Current crime statistics suggest that one out of every three UK residents will be burgled sometime in their life.  Our homes and our possessions are important to us, and it's up to us to take measures to protect them.

There are two basic types of home insurance that you can purchase: buildings insurance and contents insurance.  Buildings insurance provides cover for your physical buildings and some of the essential fixtures.  Contents insurance covers everything else inside your home.

If you actually own the property you're living in, you'll want to make sure you have both buildings and contents insurance.  But did you realize that you're not required to by both policies from the same company? The home insurance market is incredibly competitive.  If you shop around and compare home insurance policies, there's a good chance you'll save money by buying your buildings and contents cover separately.  About the only possible disadvantage to this arrangement is that when it comes to claims handling, everything might go more smoothly if both policies are with the same company.

When you're comparing home insurance policies, be sure to read them completely.  Most modern home insurance policies are free of fine print and written in easy to understand language.  Compare coverage in terms of excess and exclusions.  With most home insurance policies, you'll be required to pay the first amount of any claim.  This is called excess and it may vary from policy to policy. 

Exclusions refer to items that the home insurance policy will not cover or situations in which coverage will not apply.  For example, many insurance companies won't pay for a loss if the property has been unoccupied for more than 30 days.  For most people, this is not a problem.  But if you travel extensively and you frequently leave your home sitting empty for long periods of time, then you might want to pay extra to remove this exclusion.

You might also want to consider adding coverage for accidental damage.  Chances are, you're a lot more likely to spill a glass of wine than you are to lose your home to a fire.  Many experts believe that coverage for accidental damage is a good idea, because home accidents occur quite often.

Of course, you will be paying a premium for buildings and contents coverage.  Home insurance premiums can be based on the number of bedrooms in your home, which is easy to determine but may result in higher costs.  A more accurate method is to base the premium on the exact value of rebuilding your home and replacing the contents.  But as you can imagine, this number will be a little more difficult to calculate compared to simply counting bedrooms.

To be perfectly honest, your postcode may play a large role in determining your premiums.  Crime rates and other risks tend to run in neighborhoods.  But that doesn't necessarily mean you can expect to be paying exactly what your neighbor pays for home insurance.  Even after you sign the contract, your premiums may change occasionally if they are linked to an external index like the Retail Prices Index (RPI).

If you happen to be living in a nice home filled with good things, then there's a good chance that you've worked fairly hard to get them.  It would be a shame to lose everything to a burglar, in a fire or as the result of a natural disaster.  The monthly premium for good home insurance cover is a small price to pay for peace of mind.