Contents insurance policies protect your personal belongings from mishaps ranging from theft and vandalism to flooding. While you are under no obligation to get contents cover, it is worth a serious look if only for your peace of mind.
What exactly is contents insurance?
Contents insurance safeguards the value of your things when they break, go missing, or are stolen from your home. If the unthinkable happens, your insurer will either pay for the replacement cost of your belongings or for repairs.
Damage due to fire, storms, hail, even an earthquake or other catastrophe are also part of the conditions, sometimes called "perils," covered by your home contents insurance policy.
What things are covered?
Basically, anything that isn't bolted down to the floor can be legally covered by contents insurance. Think of your telly, computer, clothes, jewellery and even furniture. If something happens to any of it, you can claim compensation.
Higher value kit like racing bikes and prosumer cameras might benefit from equipment insurance which is more suited to big ticket items.
Don't forget that rugs, ceramics, pictures, books and even your music collection are also included if disaster were indeed to strike.
Calculating how much contents insurance you need
One of the first questions you might have about home insurance is how much cover is enough. To avoid being part of the 20% who are underinsured and don't know it, you need to look at all your earthly possessions and decide how much it would cost to buy everything you owned once again.
The best way to do this is to think bigger than being burgled. First, imagine that your home or flat has been levelled to the ground by a landslide, flood or some other divine conflagration. Going room by room, add up how much would it cost to re-purchase all your things. Use this list to jog your memory and tally all your expenses:
- Kitchen: cutlery, microwave oven, toaster, kettles, pots, pans, skillets, fancy wine glasses and Game of Thrones goblets. Your washing machine, fridge and dishwasher (lucky you!) should also be on your list.
- Bedroom: pillows, duvet and bed covers, those silk sheets, jewellery, antique teddy bears, the best of your wardrobe and your memory-foam mattress. The bed itself or any other fixture can also be included.
- Living room: the 4K flatscreen TV from Argos, your comfiest cushions, PS4 or Xbox One, the rug, coffee table books, and that DVD box set of Minder your aunt got you for your 16th birthday. Don't forget that furniture is fair game. Sofas, cupboards and curtains also have their place in your estimate.
- Shed, garage, loft or man-sized safe: Don't forget whatever you keep in there may also have value and your insurance company won't judge.
Get ready, you might do a double-take when you look at your sums. A writer at Confused.com came up £15,000 short when she double checked her first appraisal. However, after doing this exercise you will be better prepared to settle on a coverage level.
How much does it cost on average?
There is some debate as to what the average cost should be. Money Supermarket estimate around £76 but the Association of British Insurers (ABI) beg to differ with £139 per year. That is a steep difference, which proves it's worth shopping around to find the best deal for you.
Other things that affect your insurance quote include:
- Your postcode: your county, town and neighbourhood all play their part.
- Your dwelling: whether you live in a semi-detached house or a flat will impact how secure your home is perceived to be by the insurance company. There is a difference in price when it comes to homeowners and tenants.
- Reinforced locks, smoke alarms and burglar alarms can improve your premium or deductible as they help with underwriting your home insurance policy.
- Your insurance history: If you have filed a lot of claims, insurance providers will see you as a higher risk and switching does not wash that away, at least in the short-term.
- Your demographic group: just like with car insurance, your age, your relationship status, number of people in the household, children or dependents and education level will affect your premium.
Choose the right kind of home contents insurance
There are two kinds of home contents insurance. You will get a very different insurance quotes depending on the one you pick, but the same goes for the payout should misfortune befall you:
- An Indemnity policy accounts for wear and tear when it comes to paying out a claim. That British flag cushion your cat peed on three years ago is not going to be as valuable as when it was new and you will get compensated accordingly for it.
- As new policy, as the name suggests, gives you the full sticker price no matter what. Say a frozen water pipe bursts over your living room and douses your sleek Macbook with freezing water, you would get a retail price payout, meaning you could go to Dixons and get a new one faster than it takes MI5 to unlock an iPhone.
It doesn't take a rocket scientist to figure out that Indemnity policies are going to be cheaper than As New policies.
If you mainly have belongings with decent value, such as electronics, that will continue to be easily replaceable over the next few years, then you may want to bite the bullet and go with a New for Old policy. However, if your average item value is fairly low then an indemnity policy is also a solid bet.
What to do with high-value belongings?
Anything that tops £1,000 in value counts as a high value item, therefore high-risk too, because they represent a juicier opportunity for thieves and robbers.
Things like jewellery, musical instruments and art (priceless by definition), will often have a maximum cut-off that limits how much insurance companies are willing to compensate you for the replacement value. For this reason, if you have anything that could fall under this category, checking these thresholds is your first port of call.
Make sure your cover, especially the sum for insured valuables, is always accurate whether you are downsizing or moving on up. Otherwise, any claim reimbursement might end up not being enough.
Many contents insurance plans will let you adjust your coverage amount during the year so that, for example, you can account for holidays or tying the knot. These are times when you may have presents worth a great deal of money in your home. You might also change cover amount if your children and relatives move out (or back in!). While certain insurance providers may do this automatically, it's a good idea to keep an eye on it.
What is additional contents cover for?
Not every unfortunate circumstance works out the same and because of this, insurance suppliers allow you to tailor your plan to specific needs. Here are few of the many ways it could help you:
- If you are clumsy, have a hyperactive pet (or child) you can be protected from valuable possessions being accidentally knocked over, dropped, or destroyed in any way, accidental damage cover can be a relief.
- If you take your laptop to your fave coffee or tea spot and you want to be covered in case it gets nicked during a toilet break. Theft outside of the home may not be covered by the basic plan.
- If you want to be covered in case your bathtub overflows, your grandfather clock is full of termites or some other household emergency, you can have someone over to fix things right away. You will have to deal with less paperwork than usual and will get 24 hour priority service.
How to get good contents insurance that isn't too pricey
Here are our tips to get decent contents insurance cover that you can easily afford:
- Pay for your insurance annually because it will come out cheaper than monthly or quarterly premium payments.
- If you own your home, you can bundle your contents with the compulsory building insurance for your property to get a lower price.
- Think about whether you really need additional cover, such as personal liability, if you don't usually take valuable belongings out with you.
- Avoid becoming a target of opportunity by investing in home security. Strong locks, burglar alarms and motion-activated lighting can prevent a big upset and keep your excess payments from increasing. After all, they say possession is nine-tenths of the law - but shouldn’t that really be prevention?
- Compare insurance plans and providers: make sure when you are shopping around you are comparing the same amount and quality of cover so you are not caught by the unexpected. You should also do this every time you contents insurance is up for renewal. At the end of the day, this also makes you a better-informed customer, which will help you weigh up what is best for your home and avoid overpaying.