When thinking about insurance policies, people tend to think about the legal obligations first and foremost. You have to insure your car in order to drive it, in fact you have to insure it even if you never drive it. And in order to secure a mortgage on your home, you need buildings insurance, too.
Home contents insurance, however, is still optional in the UK, and many people decide not to bother with it, and ‘save’ the money. This is all very well if your house is 100% safe from burglars, fire, flood and other acts of God, but how do you know that’s the case?
Apparently, one in three households is likely to be burgled at some stage, but only three-quarters of us have adequate home insurance policies.
So, what will home contents insurance cover?
Broadly speaking, standard contents insurance will cover items that you would take with you if you were to move house. These include things like electrical items, white goods, money, clothes and furniture like your sofas and chairs, beds, wardrobes and tables. The insurance covers the value of these items against loss or damage caused by theft or break-in, fire, lightning, explosion or earthquake. It also covers water damage through flood, burst pipes or storms.
The type of policy you choose can vary. The main choice is whether you have a policy that covers your contents ‘as new’ or ‘new for old’ or whether you go for an indemnity policy.
‘As new’ means that the insurance pays out the full cost for repair or replacement of something that has been damaged, or pays to cover the cost of replacing stolen belongings. If you have this kind of policy and a flood destroys your sofa, for example, then your insurance cover will allow you to go to a sofas sale and buy a new replacement.
Indemnity policies cost you less in premiums as they pay out less in case of a claim. The insurance payout amount is reduced to include depreciation in value or wear and tear on goods. As an example, if your six-year old TV is damaged in an electrical storm, then the payout will reflect its current value rather than its as new price.
If the worst happens and your home is damaged in some way, you’ll be grateful that you’ve made the relatively small financial commitment to have contents insurance, even if you’re not obliged to.