The Ultimate Home Insurance UK Glossary
Reading your home insurance UK policy wording can be confusing. What does excess mean? What is accidental damage? We have written a jargon-busting home insurance UK glossary to help you get your head around all the new, unknown terms you might encounter. Read on to learn all the frequently used words and phrase, avoid paying unecessary excess, and become an expert on your home insurance.
Home Insurance UK: The Two Key Terms
The main terms connected to home insurance in the UK are buildings insurance and contents insurance. Let’s break down what they both mean.
This covers the structure of your home, i.e. the walls, roof and windows, plus any permanent fixtures (toilet, bath, oven etc.) and any permanent outbuildings (garage, shed etc.), from damage and destruction. Find out more about what events it covers you against in Selectra’s guide to buildings insurance.
Contents insurance protects all your personal belongings and the removable items in your home, such as furniture, your clothes, TV and even carpets from damage and destruction.
Together, buildings and contents insurance make up a standard home insurance policy. They can be taken out separately or together in a combined policy.
Home Insurance Terms: From Excess to Accidental Damage
So now we have covered the two main home insurance phrases, let’s dive into the nitty gritty of your home insurance UK policy wording.
1. Accidental damage
Accidental damage refers to damage caused to your property or belongings as a result of a mishap, for example, drilling through a wall and hitting a water pipe, or spilling red wine on your lightly coloured sofa (ah!). This cover is usually an optional add-on to home insurance policies.
Add-ons, sometimes called extras, are simply additional types of cover that you can choose to include in your home insurance policy. They are not included in the standard policy so you can ‘add them on’ at an extra cost. Examples of typical home insurance add-ons include home emergency cover and accidental damage.
If you choose to pay for your home insurance policy monthly (instead of a one-off payment for the full year), you will be charged interest on every payment. This interest is known as the annual percentage rate (APR).
4. Alternative Accommodation
If your home becomes uninhabitable following an event you are insured for - such as a flood or a fire - your insurer might provide you with accommodation to live in while your home is being repaired. In some policies this is included as standard, in others it is an add-on.
5. Automatic renewal
Home insurance policies are typically valid for a year, after which they can be renewed. Automatic renewal means you (the policyholder) do not need to do anything in order to renew your policy when it runs out; it will renew on its on.
A lot of insurance providers will set your policy to automatic renewal when you first take it out. If you are not sure if you want to renew your policy, make sure you cancel automatic renewal straight away so you are not caught out later on.
6. Cancellation/exit fee
Cancellation fees come into play 14 days after you have taken out your policy. During those first 14 days (known as the cooling-off period), you can cancel your policy for free and get a full refund. If you choose to cancel your policy after this time, you will likely be charged a cancellation fee - sometimes called an exit fee - and usually won't receive a refund. The amount of this fee varies depending on the provider.
7. Claims history
Your claims history is the record of how many times you have claimed and what you have claimed for with all home insurance policies you have had (not just the ones you have regsitered with your current provider). Your claims history affects how much your policy will cost: typically, if you have previously claimed a lot of times, an insurance provider will charge you more.
8. Current Market Value
This is the price your house would sell for if it was for sale right now. It is different to your home’s rebuild cost (see below) as it takes into account the current property market and your postcode.
Depreciation is the decrease in value of your property and the items inside caused by wear and tear over time. It affects how much your provider will pay you for a successful claim.
10. Escape of water
Escape of water refers to the damage caused by water leaking from any fixed water fitting in your home, such as the central heating system, water pipes or your washing machine. So basically it is just a fancy way of saying a water leak! This cover is included in most standard home insurance UK policies but only covers you for the damage caused, not the repair of the initial problem (unless this is caused by an insured event, such as an earthquake or storm).
Excess is the amount of money you pay when you make any home insurance claim. For example, if you make a claim for £1,000 and have an agreed excess of £200, you will pay the first £200 and your insurer will pay the remaining £800. There are two main types of excess that every provider will charge you:
- Compulsory excess - this is a fixed, non-negotiable amount set by the insurer that you must pay on any claim. Providers tend to set a higher compulsory excess for escape of water and subsidence (see below) claims. These will be listed in your policy wording as ‘escape of water excess’ and ‘subsidence excess’.
- Voluntary excess - this is the amount you choose to pay on top of the compulsory excess. You will agree an amount with your insurer when you take out your policy. Agreeing to pay a higher excess can lower the cost of your overall insurance, but it also means you will have to cough up more money yourself if you make a claim.
Every home insurance policy will feature events and types of damage that it does not cover your property and contents for. These are known as exclusions and will be listed in the policy wording so make sure you read it carefully before taking out a policy.
13. High Risk Items
High risk items are any small, high-valued belongings you have in your property that are easy to steal, such as jewellery, laptops, tablets and mobile phones. It’s important you conduct an accurate pricing of all your high risk items to make sure you get cover for the correct amount. Don’t be left under-insured! (see below)
14. Home Emergency Cover
This is usually add-on cover that provides access to 24/7 assistance to help fix a home emergency, such as a burst pipe or problems with your heating. The events covered differ from provider to provider. For example, some providers include boiler cover and others don’t, so make sure you read the fine print.
15. Insurance Premium Tax
Insurance Premium Tax (IPT) is a compulsory tax on general insurance that will be included in the price of your home insurance UK premium. You can find the current IPT rate on the government’s official website.
16. New for old cover
If you have new for old cover included in your policy (it is standard in most home insurance UK policies these days), it means your insurance provider will replace any stolen or damaged items with new ‘like for like’ items. This does not mean that your two year old macbook will be replaced with a brand new latest addition macbook. It means your macbook will be replaced with a brand new laptop that has the same current market value as your macbook.
17. Period of cover
This refers to the amount of time your home insurance policy is valid for (typically a year from the date it began). It will be clearly stated in your policy documents. When your period of cover ends, you will be given the option to renew your policy.
Your insurance premium is the amount you pay for your home insurance policy. You can either pay this in one lump sum (annual premium) or split the payments into monthly instalments (monthly premium). If you choose to pay monthly, you will be charged interest (APR) on your payments.
Peril is the term given to an event/type of loss or damage that a home insurance policy covers you for. A fire or storm, for example, is an insured peril. These can also simply be referred to as insured events.
20. Personal Possessions
Personal possessions are items you would typically take with you when you go out of your house, e.g. your watch, jewellery, mobile phone, laptop or your expensive pair of designer sunglasses. Under a standard home insurance policy, these items are obviously covered when in your home, but if you want them to stay protected when you take them out with you, you might need to add personal possessions cover onto your policy.
21. Rebuild cost
The rebuild cost refers to the amount of money it would take to rebuild your home from scratch if it is completely destroyed. This is different to the current market value mentioned above. It is usually cheaper as it does not take into account location: it is based on the cost of material and labour needed to rebuild your house. You will need to calculate your rebuild cost to know how much your sum insured (see below) amount should be.
22. Single article limits
All home insurance policies include single article limits, which refers to the maximum your provider will payout for any one item. If you have an item that is worth more than this amount, such as a particularly expensive piece of jewelry, you need to inform your insurer about this item to ensure it is fully covered.
23. Specified/listed items
Items that exceed the single article limit mentioned above will be included in your policy as specified items, sometimes called listed items. This means that your insurance provider is aware of the items’ value and will still payout for them if they are stolen or damaged.
Subsidence is the act of ground underneath a building collapsing or sinking, causing damage to the building’s foundations. It is quite a serious problem as it affects the structural safety of a building, but in most cases it can be fixed. Spotting subsidence early is the best way to prevent further damage.
25. Sum insured
Your sum insured is the total amount you can claim for if you lose everything i.e. your house burns to the ground taking all your personal belongings with it. The amount is split between buildings and contents insurance. Both will be finalised when you take out your policy
- The sum insured for your buildings insurance is based on your home’s rebuild cost.
- The sum insured for your contents insurance is based on your estimation of the total value of your home’s contents.
It’s really important to calculate the total worth of your contents as accurately as possible to ensure you are not under-insured. Use our very own contents calculator for a bit of guidance.
26. Trace and access
Trace and access covers the cost of investigating and finding the source of a leak. Without this you are protected for the damage caused by the leak, but not finding the actual leak, a process that can be really expensive. Most policies only include trace and access for water leaks, but some include cover for gas leaks too.
If you are under-insured it means the sum insured amount listed on your home insurance policy is too low. In other words, you have under-valued the contents of your home and/or under-calculated its rebuild cost and so are not covered to completely restore everything in the event of total loss.
Being under-insured also means you could receive a reduced payout from your insurer on any claim you make. For example, if you claim for a stolen laptop worth £1,000 but are under-insured by 10%, your provider might make a 10% reduction on your claim, giving you £900 for the laptop instead of the full £1,000.
This is why it is really important to make sure you are not under-insured by calculating both your contents’ value and home’s rebuild cost accurately.
A warranty is a condition included in your home insurance policy that you must comply with in order to make a successful claim. For instance, your policy could state that you must lock all doors and windows when not in the house. If you fail to meet this warranty and suffer a burglary, your insurance provider might not payout. Make sure you read all the fine print and are aware of any warranties in your policy!
All material on this page and the selectra.co.uk website is for information purposes only and does not constitute any form of financial advice. Selectra.co.uk is not responsible for any consequences that might arise from your use of the information provided.