Home insurance (that is, a policy encompassing both contents and buildings insurance) is not a legal requirement. However, building insurance is required by most mortgage contracts. Unless a property is owned outright then an owner may be required to have it by their lender.
Even without being a requirement, home insurance is extremely important to protect what is most likely the homeowner’s largest asset.
Having a basic insurance package is vital for homeowners to protect their home and possessions. On a basic level it is essential to have enough cover to rebuild a property if it is destroyed, as well as covering the cost to replace contents if the worst should happen. To work out the cost of rebuilding a particular property, use the rebuild cost calculator by BCIS, the Building Cost Information Service.
Contents insurance protects the valuable belongings inside the home by covering the cost of replacing them. For a basic package this will include furniture, clothes, jewellery, and electrical items like mobile phones if damaged or destroyed by fire, flood, water damage or if the items are stolen. Extra cover can be added on to a policy for accidental damage to contents, for example spilling wine on a carpet.
Buildings insurance offers protection to the structure of the property from the roof and walls to fitted cupboards, windows and floors. This type of insurance is also for damage caused by a disaster such as a fire or a flood. But accidental damage can be added to a policy as well.
There are also additional features that can be included in a policy which, while increasing the price, could also be vital for some.
There is the choice of trying to keep the premium low by increasing the amount of excess on the policy, which is possible as long as the policyholder is happy to pay the full amount if the worst happens.
The fewer additional features on the policy the cheaper it will be, but it is important to really think about what features could be beneficial to the homeowner.
Extra cover can include:
- Accidental damage
- Public liability
- Home emergency
- Legal expenses cover
These extra options may cost more but the added premium can be well worth the expense. Home emergency cover provides a callout service to fix emergency damage, such as lost heating or electrics or flooding. Coverage varies a lot from one plan to the next, so reading the details of coverage is critical. And accidental damage offers cover in case the homeowner or a visitor damages the property or the contents. Both of these added features can be useful to have so it is worth weighing up the cost against what protection is really needed.
It is important to carefully read what is included in a policy as well as what conditions and exclusions there may be. For instance if working from home affects the insurance cover and how long the home can be left unoccupied before it is deemed empty and cover is limited or void.
Does a mortgage require home insurance?
Mortgage companies will often want buildings insurance to give financial protection to the property.
Buildings insurance and contents insurance can be purchased separately but it is cheaper to buy both combined as a home insurance policy.
Does a leaseholder need home insurance?
Depending on the leasehold agreement building insurance may or may not be needed.
In the case of leasehold flats, whoever owns the freehold will normally purchase buildings insurance. This can be the leaseholders of a flat who jointly own the freehold, or a separate person. In this case the freeholder may charge the cost of the insurance back to the leaseholders.
Leasehold houses are not as common as leasehold flats, so for houses it is more likely the leaseholder will be required to purchase buildings insurance.