Home Insurance:
Buildings insurance
This is often a condition of the lender giving you a mortgage so, in the event of a disaster, it can be repaired or rebuilt. If you don’t have buildings insurance and your house burns down, the lender will have no collateral for its loan, so will call it in.
In which case, not only will you be homeless, but you’ll still owe the lender the value of the mortgage. Because so many lenders have suffered this, they now insist you provide proof the property is insured.
The lender will ask you to cover the property for the rebuild cost, which should be noted in the survey.
In most areas of the country this will be considerably less than the market value of the property. Most insurers cover you for the rebuild cost, although some will cover you for the market value. Check which one your policy will pay out on.
As a matter of course, most buildings insurance policies cover the fabric of the building, including built-in kitchen units and bathroom suites, outbuildings, including sheds and garages, and any walls, gates or fences.
These tend to be covered against damage or destruction caused by fire, storms, theft, vandalism, escaped water, flooding and subsidence.
Some also offer accidental damage as standard, but in most cases you will have to pay extra for this cover.
This is the element that covers damage caused by, for example, drilling through a pipe.The cost of adding on this type of cover will vary, as will the cost of the basic policy, as insurers base their premium calculations on a number of factors.
How much it costs
The main factors are the age of the property, postcode, age of policyholder, number of bedrooms and type of property. Generally, the cheapest type of property to insure is a semi-detached house.
When you sign up for a mortgage the lender will ask you if you want to sign up for its buildings and contents cover.
Contents insurance
This cover is optional but it's not a good idea to skimp. In the 12 months before September 2002 there were 982,000 burglaries in England and Wales, and there are many other ways you can lose your possessions.
Contents insurance covers the things that aren't part of the fabric of your home, such as furniture, electrical equipment and clothes. It also covers curtains, carpets and things in your garden, and most polices also cover the contents of your freezer.
As with buildings insurance, most policies pay out in the event of a burglary, vandalism, fire, storm and flood, and premiums are calculated according to the type of property you own and its location.
However, contents insurance is perhaps more complicated to buy than buildings cover because of the large number of items most people have in their homes and the wide range of scenarios covered by insurers.
Accidental damage cover is available on contents insurance policies. This will protect you against things like paint spillage and damage caused by pets, so it's a good idea to take it if you plan to redecorate or have a cat that loves to scratch furniture.
Adding this cover usually costs extra, although some insurers include some level of cover as a matter of course.
Working from home
You need to look closely at the policies on offer if, for example, you work from home.
Some insurers automatically cover up to £5,000 of home office equipment. This kind of cover built into a standard policy should be fine if you work alone and at your computer, but if your employment involves specialist equipment, or you employ other people, you need to speak to insurers about more specialist cover.
Valuable items
If you have valuable items you may need to add extra cover, or consider a separate policy, as most policies cover valuable individual items only up to a specified limited.
Items that are particularly tempting to thieves - for example laptop computers that are frequently taken out of the house - may be better covered under a separate policy.
This is because, if you have the computer stolen and make a claim, you may find your home insurance premium goes up as a result.
Keeping the cover separate means you won’t pay more to cover the rest of your property because you’ve had something stolen outside your home.
Security measures
Any security measures you add to your home will also have an impact on the cost of buildings insurance.
A burglar alarm it will significantly reduce your premiums, and if you have double-glazing with key-operated window locks, this will also reduce your premium.