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Home insurance

There is a good chance that you had to take out a mortgage when you bought your home. In the bank’s long list of requirements, it says that home insurance is compulsory and buying a policy is a must for you. What do you need to know about this product, what types of policies are there and how can we help you?

Home insurance is intended to cover the financial costs of protecting your home and valuables.
Home insurance is intended to cover the financial costs of protecting your home and valuables.

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Two main types of home insurance

Not all home insurance policies cover the same thing. In fact, there are as many as three distinct types of policy:

  • Buildings insurance – protects the structure of your property, but does not protect the items you keep in it. Such a policy will allow you to receive money to repair your roof, windows or floor if a specific accident occurs. This type of insurance is required by banks.
  • Contents insurance – as the name suggests, such a policy protects the items you keep in your home. This could be a television, carpet, jewellery or even books.
  • Combined home insurance – is a product that combines the features of building and contents insurance. Due to the widest coverage, the price of such a policy is usually the highest.

You can find out more about this on the Moneyhelper website.

Building insurance

Building insurance covers the cost of repairing structural damage to the building (roof, walls, ceilings, floors, windows, sometimes built-in kitchens and bathrooms).

The types of damage that are covered in a typical buildings insurance policy are: floods, storms, fires and explosions, vandalism, fallen trees and lampposts, and subsidence. If any of these events occur and the property is damaged, the insurance policy will cover the cost of rebuilding the property to its previous condition. However, the insurance will not work if the damage occurred as a result of your negligence or in a situation where you simply want to refresh your home.

As it is quite difficult to estimate the cost of rebuilding a house, the market value of the house can be a guide to help determine this amount. Some insurance companies also offer buildings insurance up to a certain amount, for example up to £500,000 or up to £1 million, which is also helpful.

Such a policy is the absolute minimum that the bank requires. It is an option for those who do not wish to take out insurance but need to meet the bank’s requirements.

Contents insurance

Contents insurance covers the cost of replacing furniture, clothing, carpets and curtains, jewellery, electronic equipment (televisions, computers, tablets, telephones), banknotes, coins and other personal effects in the event of damage or theft. This includes damage, e.g. in the event of fire or water damage. Mechanical and accidental damage to items is not usually covered by the standard policy, but it is possible to cover this with the additional option of accidental damage cover.

Estimating the value of all your home possessions when buying a policy is also quite problematic, but it is important not to underestimate the value of your belongings. You need to make sure that you are fully protected if you ever come to make a claim.

In both types of home insurance there is what is known as an excess. This is the amount you pay towards a claim before your insurance company makes a contribution. Some companies have introduced two types of such contribution: a compulsory excess, set arbitrarily by the insurer, and a volontary excess, chosen by the customer. It is important to take this into account when purchasing a policy. The higher the excess, the lower the price of the premiums.

This is actually the least frequently chosen product. It is very rare for someone not to opt for building structure insurance, mainly due to the mandatory nature of this policy for borrowers.

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Building and Content insurance
Building and Content insurance

Building and contents insurance

If you want full coverage, you can opt to purchase a policy that covers both the contents and the structure of your home. This product combines the features of the insurances we mentioned above.

How much does home cover cost?

The cost of home insurance depends on quite a few factors like:

  • the location of the property
  • the number of people living in the house
  • the cost of rebuilding
  • the value of the contents
  • the type of cover
  • the excess amount
  • security features
  • previous claims

Home insurance can also come with additional options like accidental cover and other extras that can add to the price.

Home insurance may also include additional options, such as personal accident cover and other add-ons, which can increase the price. It does not make sense to give general prices due to the wide variation between properties, but in a large proportion of cases, a buildings and contents policy costs less than £500 a year.

Do I need a home insurance?

Building and contents insurance is not required by law in the UK. This doesn’t change the fact that having both insurances will ensure that your property and any valuables are protected in the event of the unexpected. It is simply a sensible decision.

If you own a home and have a mortgage, your lender may require you to take out buildings insurance for the duration of the loan. This insurance can be purchased from any company, not just your lender. Typically, the bank will require insurance for the building itself, but a buildings and contents policy will also be honoured.

Insurance for a rental home is also usually compulsory. In practice, the landlord is required to take out a policy to protect the structure, while it is up to the tenant to decide on contents insurance for the property.

Where I can buy home insurance?

There are at least two methods of purchasing home insurance:

  1. Direct purchase, such as online
  2. Purchase from a broker, such as Extend Finance

The first option is certainly quicker, but if you’re looking to save a certain amount of money and choose the best possible product, it’s definitely better to use a broker. Using our services does not involve any fee on your side. By becoming our client, you can be sure that the product you choose will be tailored to your needs and value for money – we vouch for this.

Make an appointment today for a free, no-obligation consultation to find out all about the policy you are interested in. Don’t wait, take care of your finances!

Our team is here to assist you. Contact us by completing the form below.

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Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services and some forms of Buy to Let mortgages are not regulated by the Financial Conduct Authority.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts
secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services are not regulated by the Financial Conduct Authority.

Extend Finance nor The Right Mortgage Limited can’t provide advice regarding Personal Pensions, Pension planning or investment planning advice. You must seek independent financial advice from a suitably qualified professional financial adviser who may charge you for advice.

Wills, Will writing, Trusts and Trust planning are not regulated by the Financial Conduct Authority.

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