UK Home Insurance: A Brief Guide

Home insurance is not compulsory in the UK (as is the case with vehicle insurance) but it is nonetheless a very good idea to make sure that you are protected from the financial implications of damage to your home or the loss of your possessions.

The UK insurance market is very large and diversified with many non-traditional players (e.g. high street banks and supermarkets) entering the insurance field over the past decade or so. This means that competition between providers is fierce and that is therefore often possible to shop around for the best deals.

Before we look at the different types of home insurance, it might be worthwhile to just make a brief remark about home insurance and mortgages. When you take out a mortgage the lender will usually insist that you take out insurance on the property that you bought. They will furthermore strongly suggest that you take out cover through them, or their preferred providers.

Many homebuyers are left with the impression that they are only allowed to take out insurance through their lenders. This is not the case and homeowners have a legal right to choose their own providers. In many cases this would be the best thing to do since the premiums of insurance policies tied to mortgages are often not the best, or most cost effective, options available.

‘Home Insurance’ is actually an umbrella term for a series of ‘coverage areas’ that are usually combined into a single policy. The five most common coverage areas are:

Buildings: This is perhaps the most important part of the average home insurance policy as it covers the building itself (including its structure, exterior, roof, fixtures and outbuildings) against damage and/or loss. Most policies include cover against fire, floods, storms, thefts, subsidence and malicious damage.

Contents: Contents insurance (which is usually optional) covers non-permanent fixtures and fittings like carpets and curtains. Cover can also be arranged for personal property located at the insured property. The risks that are being covered are fire, floods, theft, subsidence, storms and malicious damage.

Personal Possessions: This coverage area differs from contents insurance in the sense that it covers the insured person against the loss of, or damage to, personal possessions that are taken off the property to be used elsewhere. The majority of claims in this area are for items like cameras, sporting equipment, musical instruments and jewellery.

Pedal Cycles: This is an optional part of most home insurance policies. Coverage in this area extends to the accidental loss, damage or theft of a bicycle.

Legal Protection: It is often the case that a home emergency is followed by legal action of some kind. Legal protection cover (another optional extra) can help with any possible legal costs arising from personal injury claims, employment disputes, property disputes and contract disputes.

It should be clear from the above that the market for home insurance is very flexible and that it should therefore be possible to ‘design’ a policy that can fit your exact circumstances and needs.

Summary:

• Home insurance is not compulsory in the UK but it is still highly recommended as a means to survive the potentially crushing financial costs associated with major emergencies.
• Many financial institutions offer insurance products linked to mortgages or other loans. Taking up these products is not compulsory and the consumer is free to shop around for the best price.
• Most UK Home Insurance policies offer buildings insurance as standard and then allow the consumer to choose from a range of optional extras.
• Some of the extras that can be added to home insurance policies include: contents insurance, personal possessions insurance, pedal cycle insurance and legal protection.