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What is contents insurance?

If you own or rent a home, you may have heard about getting contents insurance. But what is it and why would you need it?

What is contents insurance?

Contents insurance, also known as home contents insurance, is taken out to cover the cost of replacing belongings in your home that may get lost, damaged or stolen.

The belongings you protect are things that can be found within your home but aren’t part of the home itself. This can be belongings like furniture, kitchenware, electricals, clothing and décor. A good way to think of it is anything that you would take with you if you moved to a new house.

These should be personal possessions, so if you run a business from home or sublet, these items will not be insured. Also remember that there is often a limit to how many high value items you can insure, so prioritise your most precious possessions or take out separate insurance to cover high value items like musical instruments.

What does it cover?

Most contents insurance will only cover loss or damage to your belongings that is out of your control. The typical scenarios that contents insurance will cover are:
  • Fire
  • Theft
  • Flooding
  • Storms
Protection against accidental damage is not usually included in the standard policy but is often an optional add-on that will cost extra. Make sure to check the policy if this is something you are interested in. It can be useful if, for example, you have pets or young children who are partial to accidentally breaking things.

What else can it protect?

While the basis of contents insurance is to protect the belongings in your home, it is possible to protect those items that you may take out of the home with you.

Items like laptops, phones, jewellery and bags that will leave the home when you go out, go to work or go on holiday can be protected by contents insurance using an ‘all-risks extension’. Also known as Personal Possessions Cover, this is a policy (likely an add-on) that protects items from loss or damage incurred away from your property.

There are often restrictions on what items and situations are covered by an all-risks extension so be sure to read your policy carefully if you take this out.

Who needs it?

If you are a homeowner with expensive belongings or ones that are precious to you, it is a good idea to get contents insurance. Protecting everything in your house against any possible accidents is your responsibility once you own that home.

Note: To protect the structure of the building itself, as well as any fixtures and fitting (like baths or boilers) you will need buildings insurance. Many insurance companies will offer a bundle of buildings and contents insurance to homeowners, so look out for that.

If you are the tenant of a rented property, with belongings you want to protect, it may be worth considering taking out content’s insurance. However, there are things to consider in this instance.

If you get contents insurance for a rented property you share, being named on the policy will make you liable for any claims made by the people you live with, even if you were not involved in the claim. This will stay on your record and may affect future insurance premiums.

You can instead get contents insurance that pertains to just the items in your own room of the flat or house share. In this case you need to have a lock on your door, this will show that you are the only one able to access that room if you ever want to claim for theft. In this case you will also need some proof of forced entry.

If your rented property is furnished by your landlord, it is their responsibility to get contents insurance for that furniture, as it belongs to them. If the furniture is stolen or damaged, you must contact your landlord. You’re not able to make a claim, but they might decide to.

How much does it cost?

Like other insurance policies, such as car or buildings insurance, contents insurance will be paid in instalments. These can be monthly or annually based on the policy you choose.

How much your insurance will cost depends on the items you are insuring and the kind of policy you have. There are three main policy types:

Sum insured – with this insurance policy you will be paying based on the total value of the items you are insuring. So, it’s helpful to work out how much your items are worth before taking out this policy. There is also a limit on how many items you can ensure.

Bedroom insured – with this policy you will instead be paying based on the number of bedrooms the insured property has. This can be more expensive that sum insured, but often gives you more cover.

Unlimited sum insured – this policy is much the same as sum insured, but there is no limit to how many items you can ensure. Just remember that the more you insure, the higher the cost.

Many policies will offer a ‘no claims bonus’, that rewards you for not making any claims over a certain period of time, usually a year. This will increase the longer you go without claiming.

How much will you get if you make a claim?

It is important to remember that if items you have insured are lost or damaged, you may not receive the exact amount of money you paid for them as part of your insurance.

If your contents insurance policy is labelled as indemnity, the insurance pay-out will take into account how much the items are worth at the time they are lost/damaged. For example, if you bought your sofa for £500, but you’ve had it for 5 years, it will likely have a great deal of wear and tear. In this case, the insurance pay-out is likely to be significantly lower than £500 because the item has depreciated in value. You will therefore have to replace the sofa with a cheaper model or use some of your own money.

However, some policies are labelled new-for-old, meaning that your pay-out will allow you to get a brand-new version of the item that you have lost. While this may seem like a better deal, remember that a higher pay-out means you will be paying more for the insurance. Consider your finances and whether this is a worthwhile investment for you.
 
 

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