Household insurance
How much cover
Regardless of whether you are buying buildings and contents
insurance separately or together, you should make sure that
both elements are sufficient to meet your needs.
Buildings insurance is the easier of the two to determine.
Basically, this must provide a sum assured that is enough
to pay for the rebuilding of your home. If you are buying
a new home and have a survey done, this figure will usually
be indicated in the survey or valuation. If you are unsure
whether this is accurate, check with the builder. If a lot
of time has passed since you last determined the rebuild
cost or you have made significant alterations to the property
(such as a loft conversion or an extension), you should
ask a reliable builder to estimate the rebuild cost again.
Almost all contents insurance policies also put a limit
on the overall amount that you can claim, usually referred
to as the sum assured. For mainstream insurance policies,
this is often set at around the £30,000 mark. Many insurers
are fairly inflexible in that they have a range of standard
policies with a set sum assured and do not offer many options
to customise the policy any further.
To decide what your minimum sum assured should be, make
an inventory checklist of absolutely everything you can
think of that you have in and around your home. Then calculate
how much it would cost to replace each of the items. This
should include things that you have made or built, been
given or bought, as they would all need to be replaced if
they were stolen or damaged. You should also try to include
an approximate date on which the item was purchased and
gather together any receipts you may have. Making this list
is an incredibly tedious thing to do, as you will have to
slowly go through every room in the house, listing every
item and then attributing a replacement value to it. It
is worth taking the time to do this properly though, as
you will probably be surprised at how high the eventual
total is.
Some insurers also put a limit on the amount you can claim
for individual items. You should look out for this in policy
details, where it will usually be called the Single Item
Limit. It may be a lower value than some of your possessions.
Where this is the case, you have three options:
The cost of buildings and contents insurance does not stay
static year on year. The buildings insurance element is
often index linked, which means that premiums rise in line
with the retail price index (RPI). Social trends can also
affect premiums; several years of high aggregate national
claims levels can result in higher general levels of premiums.
This can result from widespread increases in crime, or a
series of natural disasters, both of which will lead to
lots of insurance payouts.
