Things to look for in a Home insurance policy

When you compare home insurance it can be tempting to focus purely on the size of the premium you have to pay, particularly during a period of financial turmoil. However, finding real value for money means much more than focusing on price alone.

Here we offer a step by step guide to help you make an informed choice about which policy is right for you.

Step one: Decide what you need to cover

Home insurance is usually divided into buildings insurance and contents insurance, which can either be taken out separately or combined.

Buildings insurance will cover the bricks and mortar of your home as well as its permanent fixtures and fittings, and may also incorporate glass in doors/windows, underground pipes/cables and outbuildings. Contents insurance meanwhile, covers the non-permanent valuables you keep within a home ranging from furniture and electrical items to clothing and carpets. You should check to see what risks you are protected against – such as malicious damage, flooding, storms, theft, fire and more.

Most homeowners will need to take out both buildings and contents cover. However, if you’re renting a property then you will not need buildings insurance as your landlord should already have it. Landlords should also take out some level of contents insurance even if the property isn’t furnished, because chances are there are some non-permanent contents within the home, such as carpets and curtains, which are worth covering.

At this stage you should also consider the “sum insured” – this is the total amount for which you will be covered. For buildings insurance, this should be enough to cover the rebuild value of the home; and for contents insurance it should cover the total value of your contents.

Step two: Look for additional cover

Remember that not all home insurance policies are the same and the cover you receive from one insurer may not match what you get from another.

For example, some insurers offer cover as “standard”, meaning these features are automatically covered in a policy; and then offer “optional extras” which can be included for an additional premium. Some of the features that may be either offered as standard or optional extras include: accidental damage cover, personal possessions cover, home emergency cover and legal expenses cover.

In addition, consider whether the insurer offers “new for old” cover or “wear and tear” cover. New for old cover will offer a new replacement for any ruined items during a successful claim; whereas wear and tear cover deducts a percentage of the item’s value based on depreciation.

If you’re likely to move house in the future, make this a consideration too. Look to see if your contents will be covered while in storage or in transit; and how long these items are covered for while you undertake the moving process.

Step three: Be aware of terms and conditions

Before signing up for any insurance policy you should read the terms and conditions carefully and look for any hidden fees or stipulations you may not have been aware of.

With regards to home insurance you should be particularly mindful of exclusions - these are circumstances in which your usual cover will not apply. So for example, your policy may cover you against theft – but this cover may not apply if you are deemed to be negligent, such as if you left your home without locking the windows or doors or without turning on the burglar alarm system.

Also be careful to choose an appropriate policy excess. The excess is the amount you will pay towards a claim – so if you make a successful claim for £1,000 and you have a £200 excess, then you would pay the first £200 and the insurer would then pay the remaining £800. Typically an excess will be divided into a compulsory excess set by the insurer, and a voluntary excess, which is an additional amount you agree to pay in case a claim is necessary.

Step four: Reduce your risk

Before you shop around and compare home insurance policies, consider all the steps you can take to reduce your perceived risk level as generally the higher the risk you pose of making a claim, the higher your premiums will be.

So for example, you may reduce the risk of theft by installing a burglar alarm, and insurer-approved window and door locks. You may also want to invest in double glazing for your home or join a Neighbourhood Watch scheme.

Similarly, you can reduce the risk of fire damage by fitting smoke alarms and fire extinguishers in a property. If you live in a flood risk area you may also want to invest in suitable flood defences, such as stocking up on sandbags and raising electrical sockets higher up the walls.

Step five: Shop around

Once you know the policy features you want then use a comparison website to compare deals from potentially more than 75 insurers with a single search. Though most comparison websites list policies with the cheapest at the top, remember that the cheapest is not always the best – and you may want to look further down the listings to find a policy that offers more appropriate cover to find real value for money.