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How home insurance works - buildings and contents cover

How Home Insurance Works graphic

The two types of insurance for your home are contents and buildings protection. Depending on whether you are a tenant or you own a home (go you!), your insurance cover needs will be different. Home insurance reimburses in circumstances of damage, loss or theft. Every insurance policy will exclude some claims after an accident, burglary, flood or other natural disaster, if the insurance providers definition of the event or catastrophe are not met exactly. Let’s see what kind of protection you get from different companies and policies.

Contents:

  1. What buildings insurance does
  2. What contents insurance is for
  3. How home insurance can help
  4. Extra cover for home insurance
  5. The main UK insurance companies


What buildings insurance does

Buildings insurance is only relevant for homeowners, who need cover for the physical structure of the building they own, namely: the roof, walls, windows, doors, and such. Buildings insurance will be of no use if anything happens to belongings inside.

The rule of thumb is if it isn’t part of the main building structure, or to put it more simply, if it can be picked up and moved, then buildings insurance will not cover it.

Buildings cover is supposed to help with claims for repairing or reconstructing a property. This could be due to damage caused by:

  • Flooding
  • Subsidence: the ground under and around the home moving or shifting in a way that damages the structural integrity of the property.
  • Fire
  • Extreme weather conditions or events

rebuilt home graphic

Every insurer recommends that property owners take out enough insurance to rebuild the home from the ground up if the worst were to happen. The easiest way to find out how much that is (confusingly it’s not what you bought the house for) is to check on the BCIS rebuild calculator.

At Selectra, we urge anyone looking to get buildings insurance to go through policy documents before deciding on one insurance company over another. We have seen examples of companies getting out of payouts by leaning on external assessors who are supposed to be impartial.

What kind of Mortice Deadlock makes a difference?

A mortice lock is designed to be fitted within the body of a door. A mortice deadlock contains a bolt that cannot move back into the lock after shutting the door. Not all mortice deadlocks are created equal and insurance providers look for BS 3621 certified locks at least for the main door of a home. Patio door locks are another area of security worth looking at closely.

What contents insurance is for

Since contents insurance is supposed to protect your belongings it makes sense for almost every adult in the UK to have it. While the causes for a claim, such as vandalism, robbery, water and fire damage, are the same as with buildings insurance, what is covered is very different.

Contents cover is exclusively for your personal possessions that are usually in your home. These are all things that you would take with you if you were moving home.

This is why anyone who is renting, even if it is just a studio flat, needs to have contents insurance to protect your home, no matter the size. The landlord can worry about buildings insurance but contents insurance coverage is vital to all.

If you are a homeowner, you are not off the hook either. While your mortgage lender will probably require you to get property insurance to protect the building itself from property damage, it would be foolhardy to go on without contents cover in your homeowners policy. Aviva, for example, provides both building and content insurance for the price of just building insurance

contents replacement cost

A home insurance policy that has contents cover will help tackle replacement cost for virtually any possession in the home. Just like with buildings cover, reading the policy details to see all circumstances that could lead to the exclusion of a claim, is a key step before deciding what company to go with.

The way that insurance companies do their underwriting will determine how claims are paid out. Whether a payout is actual cash value, new for old, or lower indemnity amounts that take depreciation into account, is something that changes from one provider to another. It can even change between insurance policies under the same umbrella.

New for old vs. indemnityPersonal property loses value over time because of wear and tear, obsolescence and depreciation. New for old means that no matter the age of the item, the original retail price will be honoured in a successful claim. Indemnity, on the other hand, assesses the current worth of the item leading to compensation that will always be lower than what was originally paid for it. You should look out for this before getting insured because it does have an impact on insurance rates.

Use our home valuation calculator and see how much contents insurance you need

How home insurance can help

Let’s imagine that a pan with hot oil catches fire in your kitchen while you were taking a well-deserved weekend nap. By the time, you frantically get to the kitchen and succeed in putting it out, the walls, countertops and cabinets around the stove have all been singed by the flames. Your insurer would tell you that the kitchen is effectively damaged to the point of loss of use.

If your homeowners insurance policy only covered buildings insurance, then your insurer has underwritten the construction value of your home. So with that in mind, the insurance provider may be willing to compensate you for fixing and repainting the walls, refitting kitchen tiling, and potentially the cabinets too.

This is all dependent on the excess and limits set by your insurer. However, even after the deductible has kicked in, your damaged appliances and belongings on the countertop will not be taken into account if you only have building cover.

contents replacement cost

If your homeowner insurance only has contents cover and the same situation was to occur, then you would be compensated for the damaged stove, the iPad that was nearby, and some of the nice plates in your damaged cabinets. However, you would be out of luck when it came to the burnt walls and warped backsplash.

As a tenant, contents insurance is sufficient in most cases since what you are most worried about are your belongings. The walls and fixtures don’t belong to you, and your landlord will be the one to primarily worry about those.

As a homeowner, it’s a very different story, unless you are happy to live with burnt walls and cabinets. Getting that fixed will be just as important as being able to get new kitchen appliances and replace belongings you cannot live without. That’s why as a homeowner it’s important to not just have buildings insurance, often required by mortgage lenders, but also contents cover. The small price difference is definitely worth it.

Is tenants’ liability cover necessary?Contents insurance is great for tenants since it exclusively protects their belongings. However, in certain cases, damage to landlord’s property may incur a cost to the tenant, depending on the tenancy agreement that is in place. Tenants’ liability insurance is one way to reduce risks for tenants when it comes personal liability, and damage to landlord-owned fixtures or fittings in the dwelling.

Extra cover for home insurance

When you get a basic insurance quote, it will be for liability coverage within a narrow set of situations defined by your insurance provider. In order to extend your protection, there are a number of extra options that well worth looking into:

contents replacement cost

  • Legal cover gives you access to legal advice and reimbursements for property, domestic or tenancy-related disputes. While legal advice will be accessible through a dedicated phone helpline, getting help with court costs and legal representation will be at the discretion of your insurer, who will more often than not partner with a separate company that assesses the claim based on its chance of success.

  • Accidental cover protects your home and belongings from damage that is caused accidentally. What constitutes unintentional as opposed to malicious or negligent acts is still fairly narrow in scope, but this extra option affords you more leeway than what is on offer by default in the basic policies.

  • Home emergency is an option that will give you access to round the clock phone support. This is handy because the helpline can dispatch accredited plumbers, electricians, and repair specialists to your home very quickly. In many cases, parts and labour will be covered to some degree by your insurance, but the focus of this extra option is getting the right person for the job to your home as quickly as possible.

The main UK insurance companies

In the UK, you can either get your insurance with a specific insurer or you can go to an insurance agent or broker who will offer a range of policies from across the insurance industry. Below you can read a little more about the main home insurance companies in the UK.

LV Insurance

LV insurance logo

A British company that started in Liverpool during the industrial revolution. They currently have 5.8 million customers for all kinds of insurance, from car to life insurance. Their home insurance policies are fairly competitively priced, with the exception of extra cover, but it is worth looking into to see if it is suitable for your household.

Reviews & Details

Ageas

Ageas insurance logo

A Belgian insurance group that operates in a dozen countries. In the UK, they are better known for their car and travel insurance. Their customer service reviews are split down the middle suggesting uneven service quality when it comes the insurance claim process.

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AXA

Axa insurance logo

A worldwide insurance powerhouse that also provides financial services. They underwrite many insurance policies from their competitors, meaning that they have a large stake in the UK insurance market. If you are looking for an established insurance provider with many optional extras, then AXA is a solid bet.

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Covea

Covea insurance logo

They work with property and liability cover. They bought out several British insurance brands to start up their operations in 2012. Covea are a serious player in the industry with around 1.2 million UK policyholders, and counting.

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Legal & General

Legal and General insurance logo

They are the largest insurance supplier on this list to maintain full British ownership. They offer many types of insurance from home to pets, and in addition also deal with investments and retirement. They have been open for business since the 1800s and have expanded as far as the United States. Their customer reviews are mixed and vary widely according to the types of insurance.

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Aviva

Aviva insurance logo

Another insurance multinational headquartered in London and with deep British roots. Like several of the companies on this list, home insurance is just one of the many services they offer to their customers in the UK and beyond.

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