Conventional wisdom says you should insure whatever you can’t afford to lose, but it’s hard to put a price on peace of mind, especially when it comes to your home.
What’s more, there are so many options to choose from, even the simplest forms of insurance can be pretty confusing. With multiple providers and policies offering different types of protection, at wildly varying prices, with various extras and add-ons, how do you know which – if any – are for you?
So, let’s have a run at this big (massive) topic, to see what it’s all about - and how important it is.
Let's start with the basics
There are three main types of home insurance.
Buildings insurance covers your bricks and mortar, fixtures and fittings – the physical structure of your home. It’s compulsory with most mortgages, but if you rent your home, it will be the responsibility of your landlord.
Contents insurance covers your possessions: the stuff inside your home. This includes things like furniture, electrical equipment and jewellery, though very high-value items will usually need separate cover.
Combined insurance covers both of the above. With all of them, you’ll generally be covered against theft and unforeseen circumstances, such as flooding or other types of damage caused by extreme weather. Some policies include a small degree of protection against accidental damage, too.
Accidental Damage Cover
You can choose to pay more for extra accidental damage cover, and to protect specific items such as bicycles or garden equipment. Personal possessions cover is another popular add-on. It’s designed to protect portable possessions – such as your handbag, phone or tablet – when you’re out of the house.
Home Emergency Cover
Then there’s home emergency cover. This is designed to protect you against domestic disasters such as burst pipes or pest infestations. You can get various levels of protection for domestic essentials such as your boiler, heating, electrics and plumbing.
So is it worth it?
Most people in the UK have decided it’s better to be insured than not. The Association of British Insurers says that in 2015-16, of the 27.2 million households in the UK, 19.7 million had contents insurance and 16.6 million had buildings insurance.
But what about you? When it comes to protection, it’s all about deciding what level of risk you’re happy with and weighing up the potential cost of repairs and replacements against the pre-emptive cost of insurance.
To do that, you need to take into account several factors, such as your location (for example, plumbers and electricians generally cost more in London than they do in Liverpool, so domestic repairs will be more expensive) and the value and condition of your belongings. Are the possessions in question irreplaceable? Are your appliances operating at peak performance, or are they on their last legs?
Your personal circumstances and attitude to money are also key. Would you rather take a gamble, with the chance of a big one-off charge, or pay a little every month to know that you’re covered? And would you be able to cover the cost, in the event of an emergency?
Here’s an example.
Let’s take your boiler. According to Which? magazine – the consumer rights champions – most common problems with boilers and central heating cost between £120 and £450 to fix. But if you need to replace your boiler with a brand new one, that’s going to cost significantly more. In fact, you could be looking at a bill of over £2,000.
Boilers generally last for around 15 years, so if yours is nearing the end of its life, boiler protection is probably a very good idea. And if your boiler is relatively new, but you’re going to struggle with the extra cost of one-off repairs, it’s still worth considering.
Another thing to bear in mind: most boiler cover policies include an annual inspection to ensure everything is running safely and efficiently. That could help you cut down on your bills, and extend the life of the boiler itself – saving extra pennies in the long-run.
If you do choose to take out insurance, don’t forget the small print! Every policy is different, so when it comes to cover, it really is all in the detail.
Whether you’re looking at building, contents or emergency insurance, make sure you check for exceptions and exclusions. It’s crucial that you know exactly what you’re covered for, and the maximum amount you can claim. That way, even if things do go wrong, there’ll be no nasty surprises.
To explore our insurance options and find out more about one-off repairs, click here.