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The Importance Of Home Contents Insurance

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By : Richard Ray    99 or more times read
A home contents insurance policy should cover everything you would take with you if you moved home.This would typically include all your furniture, household goods, food and drink, televisions, videos, computers, stereo equipment, clothing and valuables, usually up to a stated limit.

Often insurers will put an uppermost limit on the amount that they will pay out for certain items or groups of items. Whilst this is typically less than the total sum insured, be aware of any maximum sums payable for these individual items. Boats, caravans and motors are normally insured separately.

Unlike with home buildings insurance, no mortgage lender can insist that you take out contents cover and you will need to organize it yourself. However, most mortgage companies/ insurers will offer home contents insurance as well as home buildings insurance at the same time. This type of policy pays out if any of your home contents are lost or damaged.

Claims are usually made after a burglary or a fire but a policy should also pay if your possessions are damaged or lost as a result of an explosion, water leaks or if your home is vandalized. Always check to make sure these events are covered.

Many insurers cover the cost of replacing locks if your keys are stolen. Many policies will pay for accidental damage but the extent of cover can vary, so check this. Also many insurance policies will pay to replace accidentally broken mirrors and glass in furniture and some other policies will cover accidental damage only to televisions, videos, computers and stereo equipment.

Policies usually can be extended to cover accidental damage or loss of valuable items that you frequently take out of your home. This option, known as an all risks extension, may be used to cover jewelery, cameras and sports equipment. Many insurers will want ‘valuable items’ listed separately. Always check if you need to do this. If you are not sure – ask your insurer.

Many policies will also cover your legal liability in the home. You should check whether you are covered if you accidentally injure another person or damage their property. Most policies pay damages for which you are legally liable up to a maximum of £1m.

A lot of insurers provide flexible policies that automatically increase the level of contents cover at Christmas to account for the gifts you are likely to have around the house. Also policies may be ‘indexed linked’ where your premiums and the sum insured are automatically increased to take into account inflationary factors. Some insurers will increase cover for couples about to marry who may have wedding presents stored at home.

Other insurance schemes may cover children who go to college, providing free student cover for household goods and personal effects. The amount may be up to 15% of the sum insured. You will need to be aware that contents insurance will probably not cover any losses arising from business activity at home. If you run or undertake any business activity from your home, you will need to let your insurer know. They may extend the policy to provide such cover or you may need to buy a specific policy to cover working from home.

The sum insured

As with home buildings insurance cover, the sum insured is the total amount of money for which your contents are covered. It's the most your insurer will pay even if your possessions are totally destroyed and it determines the premiums you pay so it's vital you calculate the amount correctly otherwise you could lose out when claiming. Many insurers will offer discounts on premiums so when choosing your cover, check whether your insurer will do this. Several insurers will cut premiums for contents insurance for people over 45. Further discounts may be available for security-conscious homeowners with security locks fitted to every point of entry or for non-smokers and people with a claims-free history. Often discounts are also available to those who combine their contents and buildings insurance or who use the same insurer for their car and home.

Most people don't have a clue how much their possessions are worth. To get an idea of the sum insured go through every room in your house - including the loft, garage, cellar and garden shed - and write down what it would cost to replace every item at today's prices. The only exception is clothing and household linen where the value should be adjusted downwards to reflect wear and tear. A man's suit, for example, has a life-span of five years for insurance purposes. For each year you've had the suit, its value should be reduced by a fifth.

The majority of people underinsure themselves. The total of the contents of your home will probably surprise you, but your contents insurance should be based on it. Some insurers offer a maximum amount of cover which, if sufficient to cover all your possessions, removes the need for you to calculate an accurate sum insured. If it's insufficient, most companies offer extra blocks of cover. As with buildings insurance, premiums may be paid monthly or annually. It is important not to let or sub-let your house without telling your contents insurer – your policy will likely be declared null and void. Letting increases the risk of a claim so an insurer will probably impose conditions on your policy and increase your premiums. Most contents policies will not meet a theft or damage claim if you let or sub-let your house and there is no evidence of forced entry. Most insurers automatically link the sum insured under your policy to inflation so that it increases in line with inflation. Check that yours does.

If you add to your possessions, ask your insurer to increase the sum insured to reflect the increased value of your contents. If in doubt about home contents insurance, always seek advice from an independent insurance broker or agent.
Richard Ray, author of this article writes for the Householders Guide where you can find up to date Real Estate News and Household Information including more articles on home contents and buildings insurance.

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