Types of home insurance policies

Even if you do everything you can to protect your home from burglaries or disasters such as floods and fires, things can still go wrong. Unlike car insurance, however, there's no legal requirement to take out home insurance -- although it may be difficult to secure a mortgage if you don't. By investing in adequate home insurance policies you will also have peace of mind that you won't lose out financially should the worst happen.

Different types of home insurance

There are two main types of insurance to protect your property: buildings insurance, and household contents insurance. As a very rough guide, everything you could pack up and take with you if you move would be covered by household contents insurance, whereas most things that would remain at the property would fall under buildings insurance. Some providers sell these in a combined package.

Buildings insurance covers the fixed 'bricks and mortar' elements of your home, including the roof, ceilings, walls and floors – giving you protection for problems such as subsidence, floods or weather damage, and covering rebuilding costs if your home is destroyed.

Household contents insurance, as the name suggests, covers you for all your belongings such as music, clothes, furniture and carpets.

Finding the right policy: problems of over-insuring or under-insuring

Levels of cover vary from one policy to the next, so you need to find cover that suits your specific circumstances. On the one hand, you need to make sure you are adequately insured, but on the other you don't want to be paying over the odds on premiums.

Contents insurance tends to work the other way: most home owners underestimate the value of their belongings and under-insure. Write down a list of your possessions, including 'invisible' items such as music downloads that could cost a lot to replace, then tot up the total. If you under-insure this can result in claims being significantly underpaid. For example, if you’re insured for £10,000 but you actually have £20,000 worth of possessions, and then burglars steal £3,000 worth of your belongings, the insurer could assess your property and only pay out in proportion to your cover -- meaning you only end up getting £1,500 back.

Additional home insurance add-ons

You can pay a bit more to add extra cover, usually to your household contents insurance. Standard policies do not usually cover you for accidents, for example if your child breaks a valuable family heirloom, or you spill a glass of red wine on your new carpet, but you can take out extra cover for accidental damage.

Home emergency cover is another add-on, offering round-the-clock help for emergencies such as burst water pipes; while legal expenses cover allows you to claim back the legal action costs if you are injured in an accident, and even for some actions not linked with your home.