1. Household contents insurance is non-negotiable
It’s not obligatory by law however household contents insurance is something I advise all my clients to have. You no doubt have some items of worth in your home and probably more than you think. Once you start adding up the value of the furniture, electrical items, jewellery and decorative items in your home, such as paintings, or even your prized wine collection, most people are surprised at the figure they arrive at.
Now imagine that a fire ravages your home and destroys everything. Without contents insurance, you’d have to replace all those items from your own pocket. Home contents insurance transfers that risk to the insurance company. And fire is by no means the only risk. This kind of insurance protects against theft, flooding, leaks and other risks including accidental damage, although often this latter involves an additional premium.
2. Who/what is protected?
Home contents insurance covers your possessions as well as those of close family members living under the same roof. It does not cover the possessions of temporary visitors.
3. Covering items when you are out and about
Often cover can be extended to possessions which you take out of the home, including when you are on holiday, such as jewellery, cameras or expensive bags. You will need to check the small print on your policy with regard to mobile phones though – often these are excluded or may be subject to an additional premium.
4. Upper limits on single items
Particularly valuable items which you want to be covered should be flagged up to the insurer and may mean you need to pay extra. The engagement ring you inherited from your grandmother or the valuable painting Great Aunt Hilda left to you are examples of items which may need to be specified in a policy due to a high value.
5. All about excess
The excess on a policy, also referred to as deductibles, is the amount of a claim which you have to cover from your own pocket. Typically this is a relatively small amount of up to a couple of hundred pounds.
6. What is new for old?
New for old means that the insurer covers the full replacement cost of items that are stolen, lost or damaged. Most policies offer new for old but some don’t, which means that they will pay what they deem the items are worth at the time of the claim taking into account wear and tear. It’s important to understand which applies to your policy.
7. In the event of death
It’s not nice to think about but many home contents policies include a lump sum payout in the event of a death during a fire, theft or accident at home. You may also be covered if a visitor is injured or dies in your home.
8. Home contents insurance for tenants
If you rent your home you will still need contents cover for your personal possessions. In addition, often it will be your responsibility to insure any contents owned by the landlord including electrical items such as ovens and televisions. Check the terms of your rental contract to be clear about your obligations.
9. Working out how much cover you need
Under-insurance is a common issue. As I mentioned above, while you may think you don’t own much, it is very common for people to under-estimate the combined value of the everyday items in their homes once you take into account often-overlooked items such as fittings and fixtures, including curtains, carpets and flooring, or the tools in your garage and shed. It’s a good idea to put together a comprehensive inventory with accurate values to come to a realistic figure of how much it would cost to replace all your possessions. The risk of being under-insured is that an insurer may only pay part of a claim.
10. Protecting your digital ‘possessions’
Download insurance is a relative newcomer to the insurance market and usually sold as an add-on. It protects any downloadable product purchases including music and films which are stored on any of your digital devices and could be damaged, stolen or lost due to the destruction of the device. In an increasingly digital world, this is definitely worth considering. Downloads will not be protected if the loss is due to hardware issues or a computer virus so this kind of insurance does not replace the need to protect your devices against viruses.
11. Not all policies are equal
It is worth getting several quotes before you opt for a particular policy but make sure you aren’t just comparing premium. Be aware of how policies may differ in the following ways:
- What is covered
- The amount of the excess
- No claims bonus
- Conditions regarding the security conditions imposed (e.g. specific types of lock/window locks) or how long you can leave your home unoccupied for
While we all think it won’t happen to us, terrible things can happen to destroy everything in our homes and having a comprehensive home insurance policy in place which will genuinely cover the full replacement of everything we own is really important and worth taking a little time over.
As I often say to my clients, wealth protection is just as important a part of financial planning as wealth creation and household contents insurance falls into the wealth protection bracket, along with life and health insurance and estate planning. It’s definitely worth getting it right and your financial adviser can help you do that.
Chartered Financial Planner
It is my fundamental belief that financial planning makes life better. I enjoy helping my clients work towards their financial goals to give them freedom and choice.