As well as being the biggest financial commitment most people will make in their lives, a home will also be their biggest physical asset. Therefore it is at the top of most people's insurance priority list. But understanding how home insurance policies work is not easy for someone who has not dealt with them before. As with many types of cover, there are a multitude of phrases and many different types of cover are quite different. Many home loan providers will require that the borrower puts what is known as buildings insurance in place as a condition before they even get the funding.
Home insurance is important for the simple reason that without it, a home owner stands to lose everything in the event of a fire or natural disaster if they don't have cover. Of course, burglary is a concern too. Cover can be divided into two types - buildings insurance and contents insurance. Even people who do not actually own the house they live in will require some form of cover for the possessions they could lose in the event of an unforeseen crisis.
Buildings insurance is the type of cover the vast majority of mortgage providers will insist a buyer has in place before handing them a home loan. Accordingly many people wrongly believe that buildings insurance is a legal requirement, but in reality it is technically voluntary. Many home owners are offered a buildings insurance policy by their mortgage provider at the time of taking out the loan but they may choose to look further than this and seek a number of quotes from different insurers. A buildings insurance policy will cover the actual structure of the building and what is often referred to as 'fixtures and fittings'. This includes things like toilets, baths and fitted kitchens. Things likes garden sheds and garages will also usually be covered. Depending on the policy, a garden fence, outdoor swimming pool or wall in the garden or grounds of a property might not be covered. Policyholders may wish to check the small print of a policy carefully to see exactly what they get for their premiums.
Contents insurance includes just about all personal belongings, with a good guide being to think about what would be taken if the policyholder were to move house. Clothes, electrical goods, furniture and jewellery and other valuables up to certain agreed limits will be covered. Books, CDs, DVDs and other collective items will also be covered.
The majority of policies will cover these possessions if they are lost or stolen while in the home because of incidents such as a fire, flood or theft. Some policies will include accidental damage cover for things like televisions, home computers and other electrical goods. Some things which are often taken out of the home, like cameras and laptops, may not be covered if they are damaged or lost outside - a cover extension may be needed for this.
When it comes to keeping home insurance premiums low, living in a neighbourhood watch area can be a simple starting point. Improving security such as upgrading locks and fitting a burglar alarm will also usually help to bring costs down. Homeowners could do well to look further than their home loan provider when it comes to getting a policy. Shopping around for a number of quotes could save money, but it is important to check exactly what each policy covers.
David Thomson is Chief Executive of BestDealInsurance an independent specialist broker dedicated to providing their clients with the best insurance deal on their home insurance, car and life insurance.
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