The Basics of Home Contents Insurance

If you're shopping for home insurance, you'll quickly realize there are two basic types: buildings insurance and home contents insurance.  Buildings insurance covers exactly that -- the actual physical building that you own plus a few attached fixtures.  Home contents insurance, on the other hand, covers everything that's not a fixed part of your home. Let's take a look at the basics of home contents insurance.

Another way to think about home contents insurance is that it covers everything you would take with you if you move.  Contents cover is needed by both homeowners and tenants. Appliances, furniture, clothing, jewelry, cameras and electrical goods are all covered by your home contents insurance policy. 

Some home contents insurance policies will also cover some items that can be taken out of your home, like prams, bicycles or even the contents of your handbag.  But never assume coverage -- always check your policy.  Some companies may require that you buy optional "extended contents cover" for items used outside of your home.

Specific items that are more expensive (like more than 1000 pounds in value) may be excluded from your standard home contents insurance.  In some cases, you may be required to buy a separate policy for these items.  Or it might be possible to list the component parts of some expensive items.  For example, you might want to list a camera as a camera body plus a lens.

With most home contents insurance policies, you're covered in the event of various standard perils.  These normally include fires, explosions, theft, vandalism, storms and flooding.  Coverage for accidental damage to your possessions is also becoming standard as well (but remember to check).  Keep in mind that your home contents insurance only protects you against specifically named risks.  If you want coverage for all risks, then you'll need to purchase "all risk" coverage.

Coverage in the event of personal injury or liability coverage in case others are injured at your home are normally part of home contents insurance.  This is often referred to as "legal cover."  It may or may not be included in the standard quote.  If not, you should seriously consider adding it.

One of the most important numbers connected with your home contents insurance is the "sum insured."  The sum insured states how much your contents are worth, defines the total amount the insurance company is willing to replace, and determines the premiums you'll pay. 

Don't guess when it comes to the sum insured.  Chances are, the total value of your possessions will surprise you.  The best way to calculate this number is to do a complete home inventory. List everything you own, including the date you bought it and receipts if you have them.  Write down absolutely everything, including CDs, DVDs, curtains, carpets and bedding.

Finally, you'll need to decide what kind of replacement you want.  The cheapest home contents insurance is indemnity insurance.  This means the insurance company will replace a lost item with the same thing.  So if your television is six years old, it will be replaced with a six-year-old television.  If you can afford it, you really should get "new for old" coverage.  Then if any items are lost as a result of a covered peril, they will be replaced with new items.

Home contents insurance may seem like a luxury you can't afford.  But in today's perilous times, living without it would be a gamble.  And if you lose this bet, you could lose everything.