Though there are many home insurance policies available (they will differ in claims terms, excess fees and other intricacies), there are only two main types – buildings insurance and contents insurance. If you’re a first-time buyer, you might not have taken out buildings insurance before.
Basically, this covers the structure of the house itself and anything that is an integral part of it, such as walls, doors, windows, fitted kitchens and so on. This insurance is vital if ever your house is damaged by flooding or a fire.
Contents insurance covers your possessions such as furniture, and anything else you probably brought with you when moving in. If you’ve lived in a rental property, you might have taken out contents insurance before.
Why do I need insurance?
It’s generally a good idea to buy your buildings and contents insurance together from the same provider, as they may offer a discount as an incentive. Landlords might want to purchase just the buildings cover, as while they will want to protect their property with buildings insurance, it is mainly the tenants’ responsibility to insure their own possessions.
Be sure to factor contents and buildings insurance into the cost of buying a house – your mortgage provider will actually insist that you have buildings insurance in place, as they will be looking to protect their investment until you have made all of the repayments.
So if your mortgage is approved, it must mean your buildings insurance is in place, and that stage of the buying process can be ticked off ready for when you exchange contracts. Often, the mortgage provider may try to sell their own buildings insurance, but it pays to shop around and find a cheaper deal.
It’s sensible to have buildings insurance even if you don’t have a mortgage – assuming you were in a position to cover the costs of your first home yourself, without a loan. The risks of flooding, storms and fire are ever-present, and you don’t want to be left facing a huge repair bill.
Also take out contents insurance before you start moving in, as your possessions can then be covered in transit. The policy may insist that a professional removals firm is used.
How much will my insurance cost?
Buildings insurance will be calculated on the rebuild cost of your property – this is a different figure to the amount you paid for it, as it excludes the price of the land and only covers the materials and labour for the actual building.
So you’ll pay according to how big it is, the number of rooms, and so on. The area in which you live and how much of a risk it is to flooding, for example, will be factored in by the insurer.
With contents insurance, you most often add up the replacement value of all the items in your home and the policy will be calculated on that amount. If opting for a policy that provides a fixed amount of contents cover, ensure this is enough to replace all of your items as new.
As mentioned before however, there any many types of contents insurance and policies vary widely. Be sure to find one that suits the value and type of your belongings best.
The insurer will also look at the area in which you live and determine how likely it will be that the items are stolen. You might also be offered extras like accidental damage cover, which while useful may increase the price.
Keep the costs down
The costs of buying a house are challenging enough, but there are ways of reducing your buildings and contents insurance. Buying both policies from the same insurer could lead to a discount, as will paying everything as a lump sum for the year rather than in monthly instalments.
Be careful when it comes to agreeing on added extras, as these will all drive up the costs, and you could also reduce the premium by setting a higher excess – the amount of the claim you are willing to pay yourself.
Opting for a larger sum here means a smaller expense for the insurer, with the premium reduced as a result.
If it’s your first home and the first time you’ve ever bought buildings insurance, then sadly you won’t be able to take advantage of a ‘no claims discount’.
This is something that will start to accumulate for each year that passes without you making a claim, which could potentially bring your insurance costs down over the long run.
Find out more about home insurance from MORE TH>N.