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Household Insurance

What is it?

Household insurance covers the physical building and/or contents of your home. If, for example, your house is flooded or you're burgled, then household insurance normally foots the bill to put everything right.

Building insurance and contents insurance may be bought separately or in a combined policy. Most policies also offer add-ons such as legal cover and home emergency assistance.

Building InsuranceContents Insurance

Intended to provide sufficient cover to totally rebuild your home if necessary. As well as the property structure, policies should also cover permanent fixtures such as fitted kitchens/ bathrooms, flooring and interior decorations.

Do I need it?

Building InsuranceContents Insurance

If you own your home, or it's mortgaged, YES. Mortgage providers normally insist on cover to ensure they're not just left with a pile of rubble if your house falls down. If you own your home and/or rental properties, you should feel the same way too.

If you rent a property then don't worry, your landlord is responsible for ensuring the building is insured (worth checking). If you live in an apartment block then there's likely to be a communal policy which you'll pay via your service charge, always check this is the case.

What's covered?

Building InsuranceContents Insurance

Most policies will include the rebuilding or repair of your home if damaged by:

  • Fire & explosions.
  • Storms & floods.
  • Burst pipes & water leakage.
  • Subsidence.
  • Accident.
  • Vandalism, theft & third party damage.

Outbuildings such as garages and sheds are also usually covered. Cover does vary between policies, so always double check what is included.

What's not covered?

The first part of most claims, called the policy 'excess' is excluded. Some policies have a higher excess than others, so always check before buying.

All policies exclude war, invasion and terrorism. You may also not be covered if your home is empty for long periods (e.g. 30 days or more).

Building InsuranceContents Insurance

If your property is in poor condition then an insurer might not payout the full claim, check whether your policy includes 'reinstatement' - if so you should be ok.

How much cover?

Building InsuranceContents Insurance

The cost of rebuilding your home is not the same as it's sale value. For a typical property the land on which the property is built might account for about a third of the sale price.

Most insurers will estimate the cover required for you when you get a quote, but you need to feel comfortable that it's enough.

If you want an accurate estimate ask a surveyor, though this will cost and is probably not practical unless you have a large and/or specialist property. A free alternative is to the calculator on the Association of British Insurers website (note: you have to register).

What affects cost?

Costs obviously depends on how much cover you want, but other factors include:

SecurityFire RiskPostcodeClaims HistoryPolicy Excess

High quality door locks, window locks, security systems and joining a neighbourhood watch scheme can all help reduce premiums.

Ways to buy household insurance

InsurerComparison website

Buying household insurance direct from an insurer is not always cheaperthan using a comparison website. The same insurer is sometimes cheaper on comparison websites than going direct.

Household Insurance Jargon

Here's some of the more common household insurance jargon you might come across:

ABI Model DefinitionsA list produced by the Association of British Insurers that aims to standardise what is meant by 'critical' when applied to a specific illness.
All RisksContents insurance with all risks covers possessions such as a laptop or watches when taken outside the home.
Building InsuranceInsurance that intends to provide sufficient cover to totally rebuild your home if necessary.
Contents InsuranceInsurance that covers items that are not a fixed part of your home, e.g. TV, from damage or theft.
Convertible Term AssuranceA type of term assurance that allows you to convert into a whole of life policy.
Debt Payment ProtectionInsurance that's intended to help you manage your debts if unable to work through illness or injury.
Decreasing Term AssuranceA type of term assurance where the sum assured reduces over time, typically linked to a repayment mortgage.
Deferment PeriodPeriod of time that you must be unable to work for before you can claim on an income protection policy. The longer the period, the lower the premium is likely to be.
Employment & Support AllowanceState benefit intended to pay employees (and potentially the self-employed) unable to work through illness after Statutory Sick Pay ends.
EndowmentA type of life insurance policy that is also intended to provide investment returns. They have a very patchy track record.
ExcessThe amount of an insurance claim you agree to pay before an insurer pays the rest (for example, the first £50 of a claim).
ExclusionsInsurance policies often exclude certain risks or events. It's vital you check these before buying a policy.
Family Income BenefitA type of term assurance that pays out a regular tax-free income on death rather than a lump sum.
Full Medical UnderwritingWhen you buy private medical insurance the insurer asks for full details of your medical history and may also contact your doctor for more information.
Income ProtectionInsurance that pays out a monthly tax-free income if you're unable to work through illness or injury.
Increasing Term AssuranceA type of term assurance where the sum assured increases over time, usually inline with inflation.
Inpatient CostsThe costs of staying in a private hospital, usually covered by private medical insurance policies.
Loss AdjusterAn impartial claims specialist responsible for investigating claims on behalf of insurance companies.
Material FactInformation that would affect an insurance company's willingness to accept a policy, or the premium it would charge. Don't omit these when applying for cover as it could invalidate the policy.
Moratorium UnderwritingWhen you buy private medical insurance the insurer does not require details of your medical history. Any conditions that have existed over the last five years are not usually covered.
Outpatient CostsThe costs of private medical care when you're not admitted to hospital. Not always covered by private medical insurance policies.
Personal Accident PlansInsurance that pays out a lump sum in the event you have an accident and suffer a permanent or temporary disability.
PremiumThe money paid to an insurance company for an insurance policy.
Private Medical InsrancePMI, a type of insurance that pays for you to receive private health care.
Statutory Sick PayState benefit that pays employees if they're unable to work for at least four days in a row. Lasts for 28 weeks.
Sum InsuredThe maximum amount an insurance company will pay for a claim.
Term AssuranceSimple type of life insurance that offers cover for a fixed period of time for a (usually) fixed monthy premium.
UnderwritingThe process where an insurance company decides how risky it would be to insure you and how much to charge you for cover, assuming they're prepared to insure you.
Whole of LifeA type of life insurance that can run until you die, however old you might be. However, premiums tend to increase over time so it can become very expensive.