Contents Insurance: What you Need to Know

Generally speaking, contents insurance provides financial protection in case your possessions are stolen, lost or damaged due to theft, fire, smoke or water. In addition, some contents insurance policies offer add-ons like legal/liability cover, home emergency cover and accidental cover. With burglaries on the rise around the Christmas holidays, now is certainly the time to invest in contents insurance.

Contents insurance is useful for both renters and home owners, as it protects the things you would take with you when you move. (Buildings insurance, on the other hand, is only for home owners and covers the property itself—roof, walls, fitted units, flooring, outbuilding, etc.) Use this guide to learn about coverage levels, standard exclusions, and other ins and outs of contents insurance policies, to help you decide what features you need for your individual situation. All policies offer different coverage so be sure to read the policy wording before you buy.

Contents Insurance for These Events

While policies differ from insurer to insurer, contents insurance typically provides reimbursement for loss or damage that result from theft, fire, water and smoke. In addition to these standard features, extra cover can be purchased as an add on (or may be included in premium policies).

Standard Cover

  • Fire
  • Theft
  • Smoke
  • Flood

Optional Cover

  • Accidental Loss/Damage (e.g., red wine spill on carpet)
  • Legal (e.g., court costs)
  • Home Emergency (e.g., plumbing & heating emergencies)
  • Valuables (this may be an extra cost, especially for valuables worth over a certain amount)

While a basic policy is surely better protection than no insurance, you may want to consider springing for some add-on features. According to Hiscox, 1 in 6 of the paid claims resulted from Accidental Loss over the past three years. Accidental loss can cover, for instance, a wedding ring that slipped off your finger, leaving a bag on a bus or spilling paint on the carpet.

Similarly, 1 in 5 Hiscox claims over the past three years was due to Accidental Damage. Accidental damage might occur, for example, when a vase, mirror, or glass coffee table is broken.

Equally, Home Emergency Cover can be a valuable add on, especially in the winter months. Typically covered would be blocked drains and toilets, heating, leaking roof, gas/electric failure, burst pipe and lost house keys.

Contents Insurance for These Possessions

Let's say you've been the unfortunate victim of a burglary, fire or flood—what will contents insurance pay for? Roughly speaking, contents insurance will reimburse you for the loss or damage of items that you would take with you when you move.

Contents Insurance Typically Covers:

  • furniture
  • clothes, shoes and accessories
  • electrical items (computers, tablets, mobile phones etc.)
  • money
  • jewelry
  • paintings, pictures and sculptures
  • carpets and curtains
  • bicycles
  • plants in the garden
  • freezer food

Other Features

Many contents insurance policies also give you funds for temporary accommodations/rent should your home become uninhabitable due to an approved claim (e.g., fire or flood). For example, in the case of a house fire your policy might provide up to £15,000 for alternative accommodation.

Types of Policies

There are two types of contents insurance cover to choose between: new for old and old for old (Indemnity).

Policy TypePayout
New for OldYou'll get the replacement cost of lost/damaged items (except that reimbursement for clothes may be reduced for wear and tear)
Old for Old/Indemnity CoverYou'll get the current value of your possessions, which may be significantly less than the replacement value.

Premiums are likely to be lower on an "old for old" policy since pay outs would be less than on a "new for old" policy. Be sure to check what you're being offered when you shop for contents insurance—a cheaper policy isn't necessarily good value.

How Much Coverage do you Need?

Policy limits can range from £30,000 to £100,000, or more. Common advice is to go room by room through your home and add up the cost of your possessions. It is important to state the value of your goods accurately, or future claims could be reduced by the proportion by which you have under insured. For example, if you under insure your £100,000 worth of possessions for only £50,000, then a home stereo system worth £5,000 may only be covered for £2,500 in the case of theft.

Standard Cover Levels

Coverage levels vary by insurance company and policy type, but the following levels of coverage are quite common:

CategoryTypical Coverage Limits
Contents£50,000
Away from home£5,000
Theft from outbuildings£2,500

Buying a policy with a higher limit may cost more, especially once you reach £100,000 of cover. The average cost of contents insurance rises around 60% for policies with £100,000 of cover vs. policies with around £50k - £75 of cover.

Limit for High-Value Items

Most policies impose maximum limits on valuables like art, jewelry and watches—both per-item limits and a total valuables limit. Often, consumers have the option to customize a contents insurance quote/policy by adjusting the valuables cover, so it's important to take stock of your valuables before purchasing an insurance policy.

Items worth over a certain amount (e.g., £2,000) may need to be listed separately. And it's a good idea to keep a copy of your receipt or a recent valuation in case you need to claim.

Are Bikes Covered by Home Contents Insurance?

As bikes can be quite valuable and are not infrequently stolen, they tend to be treated differently from other possessions when it comes to contents insurance. In some cases, bikes are included in a contents policy, up to a limit. Other policies do not cover bikes at all, or offer bike cover at an additional cost.

Depending on the level of cover (e.g., £1,000 for one bike only, or £1,000/per bike up to £5,000 for all bikes), adding on bikes to your contents insurance can easily cost between £30 and £115 per year.

Insuring Portable Devices like Mobile Phones, Laptops, etc.

Many policies extend contents cover to insure your portable possessions while they're temporarily away from the home. Limits may be imposed by value (e.g., £5,000 total or £1,500 per item), geography (e.g., British Isles only) or time (e.g., limited to 60 days away from home). If you frequently travel abroad you may want a contents policy that offers worldwide coverage.

"Away from home" cover typically protects against theft of a device (e.g., phone, watch, or laptop) but not damage to it. Digital information, such as downloaded movies or songs, may not be covered either.

Cover for University Students

"Away from home cover" may cover your child's possessions, if he/she is away at university. Be aware that claims may only be covered in the case of violence or force being used to enter the building—contents insurance wouldn't cover the theft of a laptop during a house party, for instance. You can find information on cover for university students in the policy wording of most insurance policies.

Standard Exclusions

There are many type of claims that won't be covered under a standard, basic contents insurance policy. Below is a list of common exclusions:

  • Damage due to pets
  • Bikes
  • Valuables over a certain limit
  • Accidental damage (portable devices like laptops, mobile phones)
  • Criminal or intentional loss or damage caused by you, your family or a tenant.
  • Moths, vermin, woodworm, fungus, insects, rot, etc.
  • Faulty workmanship, materials or design
  • Deterioration, lack of home maintenance, etc.
  • War, acts of terrorism, deliberate acts of the government
  • Theft or some damage if your home isn't lived in for 60 days or more in a row

This list is certainly not exhaustive. Exclusions vary considerably by policy and insurer, so we recommend reading the Policy Wording before you buy any contents insurance policy. Researching the exclusions is important, but don't let them put you off of buying a policy altogether—contents insurance can protect you against potentially devastating financial loss should the worst happen. In addition to buying contents insurance, you can read about 6 quick tips you can follow to help protect your home from burglars.

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