How much home insurance do I need?

Work out how much cover you need for your home

Felicity Hannah - Virgin Money Living Mentor

by Felicity Hannah | Independent Money Mentor

Award-winning personal finance and consumer affairs journalist

You love your home. You’ve spent years painting it, sanding it, extending it and covering every inch of it in adorable and highly tasteful knickknacks. But are you protecting it? Your pride and joy is at risk from a host of threats including fires, floods, cat burglars, regular burglars, dry rot, wet rot, rising damp, subsidence and damage caused by falling knickknacks.

So you need cover. And it comes in two different flavours – contents insurance and buildings insurance, or a combination of the two. It can be tricky to work out exactly how much of each you need but getting it right is really important.

As the names suggest, contents insurance protects all the items you carry into a home such as artwork, furniture and clothing while buildings insurance is for the walls, roof, fixtures and fittings.

If you’re a tenant then you don’t need to worry about buildings cover, it’s your landlord’s responsibility to insure the roof. Pretty much everyone needs contents insurance, though. But how much? And how much buildings insurance is right? Let’s take a look.

Contents insurance

So many people underestimate the value of their contents. That’s probably because, while the cost of jewellery, artwork and gadgets might be obvious, it’s all too easy to forget to include less showy stuff like toys and kitchen utensils and socks.

It’s a good idea to go from room to room tallying up the different items in each. You can simply do this with a notebook but there are several online calculators that can help you check you have included everything. Remember, you need to consider how much it would cost to replace the item as new rather than what each item might be worth today.

It is very important not to underestimate the value of your contents if you want to make sure you receive enough money to cover the cost of replacing your things, if the worst happened.

It’s very likely that you will need to name any particularly high-value items such as jewellery or heirlooms. Most policies have an upper limit on what they’ll pay out per individual item unless that item is specified when you buy the cover.

And if you have a lot of gadgets then do check whether they are insured outside of the home as well – these days many of us carry a lot of electronic items.

Finally, sometimes you get cover for your gadgets or bike free with a packaged current account or included in another policy. Check what cover you already have in place so that you don’t pay twice.

Buildings insurance

You don’t need to insure your home to its full market value, you just need the policy to cover the rebuild cost and that is usually a bit less.

Don’t be tempted to name a high figure just to make sure you have enough protection, because that will mean you’re potentially paying too much and no one wants to do that!

The Association of British Insurers has a great calculator that allows you to get a rough idea of how much it would cost to rebuild your home and it’s free to use.

Some insurers work out the cost based on the number of bedrooms rather than the build cost you provide, so check if your policy refers to ‘bedroom-rated’ or ‘sum-insured’.

If you extend your home, convert the garage, add a conservatory or dig out a cellar (well, you might) then it’s really important you first remember to advise your home insurer of any work you are undertaking and once it is complete, increase your buildings insurance appropriately. Home insurance isn’t worth much if it doesn’t match your needs.

How to cut the cost of your home insurance

The best way to keep the cost of your home insurance down is to only insure the actual value of your stuff so you’re not paying for more than you need. Just make sure you regularly review the value in case it changes and you don’t realise.

After that there are some really practical ways you can cut what you pay. For example, many insurers will agree to cut the premium if your home is fitted with a burglar alarm and high quality windows and doors. 

Some insurers will cut the cost of your policy if there is an active Neighbourhood Watch in your area. Each insurer is different, so speak to yours about what you can do to limit the risk to your home and cut your premium.

Of course, anything you do to secure your home makes it less likely you’ll have an upsetting home disaster and may reduce the amount you pay.

Finally, you can often agree to pay a higher excess and cut your costs that way. However, it is really important you make it something you can afford in an emergency – otherwise the policy simply isn’t much use!

So those are the basics: make sure your pride and joy is protected and then you can relax in your home sweet home.

Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.