Buildings and contents insurance explained

Home insurance can broadly be split into two types: buildings insurance and contents insurance. If you own a property then your mortgage provider will probably insist on you having buildings insurance in place. If you rent, your landlord should have buildings insurance. Contents insurance is not a requirement, but is highly recommended.

Buildings insurance

Buildings insurance typically covers the cost of repairing or rebuilding your home if it is damaged or destroyed by such incidents as flooding or fire. The important thing when taking out buildings insurance is estimating how much your home is actually worth – bear in mind that the cost to rebuild your home is probably very different to the market cost.

Many homeowners significantly overvalue the cost of their home because of this, and therefore pay unnecessarily high buildings insurance premiums. But don’t go too cheap, otherwise you might find that if you need to make a claim, your insurance doesn’t cover the rebuild cost. This may be especially true if your home is an unusual construction.

Cover typically includes:

Storm and flood damage
Burst pipes
Fire, smoke and explosions
Subsidence
Vandalism or 3rd party damage

As well as the structure of the property, buildings insurance also covers permanent fixtures and fittings. Permanent fixtures and fittings are generally considered to be items that can’t be removed and taken to a new home. Buildings insurance can also cover outdoor structures such as garages or sheds, but look at the fine print of the policy to check.

Contents insurance

Contents insurance typically coves items in your home that might be lost, stolen or destroyed, including by accidental damage. Contents insurance can also cover items that you can take away from the home such as bikes, prams and sometimes mobile phones and the contents of your wallet or handbag.

When trying to estimate the value of your possessions, make sure you consider small high-value items such as jewellery, computers, and TV and music systems. Some policies may require you to individually itemise high-value items.

The cheapest type of contents insurance, called indemnity insurance, will replace items lost, damaged or stolen with ones of the same age. Other, more expensive insurance will replace old for new. In addition, you can take out accidental damage cover, which will again cost more, but may prove worthwhile.