Home insurance. It’s insurance for your home. Sounds simple, right? But what exactly does it cover? Well, we’re here to fill you in on all the details…
Home insurance is used to describe buildings and contents insurance. Buildings insurance is a requirement with a mortgage and is designed to pay for rebuilding the property should the structure be damaged. Contents insurance is optional but very useful, as it covers what’s inside your home.
You can get buildings and contents cover separately, or in one combined policy. The easiest way to see how home insurance could help you, is to consider what it might protect you against. So, we’re going to look at the five most common, named claims on home insurance policies.
First up, is escape of water a.k.a. leaks and floods. This is both the most common and most expensive claim, with the Association of British Insurers estimating providers pay out £1.8 million for it per day. It seems that replacing a flooded kitchen can be quite pricey. Research also suggests that many ‘escape of water’ claims are due to a neighbouring property, with this accounting for 23% of claims for flats since 2018. So even if you’d never leave the bath to overflow, are you sure your neighbour won’t? Escape of water is not always covered as standard, so talk to your adviser to be certain your policy protects against it.
Coming in second place is fire and explosion, accounting for 17% of claims. We’re going to give you some credit here and assume you know why it’s a good idea to cover your house against potential fires.
Similarly, the third most common named claim is theft, making up 12% of claims. Again, we think you probably know why protecting your valuables from burglars is sensible.
Fourth on the list is domestic subsidence. This is likely the sort of thing you don’t know about until it happens to you. Essentially, this is when the ground beneath a house moves. One of the first warning signs is sizeable cracks at weak points. Subsidence is an issue because it can reduce the stability of a building and is usually covered under buildings insurance, but it’s best to check with your provider.
Finally, the fifth named cause for a claim is accidental damage. Yep, you guessed it, this is to cover damage caused by accidents. Think spilling a cup of tea on your laptop or smashing your TV. If you’re accident-prone, or share your house with those who are (think children or animals), you might want to consider this cover.
Accidental damage is not always covered as standard, so again, talk to your adviser if you’re interested.
One final point which not every home mover appreciates: when buying a new property, the buyer is responsible for insuring the building from the date contracts are exchanges (not the completion date). This is because the seller has no legal obligation to insure the building after that date, and if the unthinkable were to happen in the period between exchange and completion, you could find yourself legally obliged to complete the purchase of a property that is uninhabitable, and uninsured.
[Source: Mortgage Intelligence, May 2021]
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