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How should I insure my home?

Insurance is one of the bigger costs of managing a home, and can set you back thousands of pounds a year. However, if you do your research, you can probably cut your bills sharply - and ensure you don’t end up with a nasty surprise when trying to claim

The two types of insurance

There are two types of insurance for your home:

  • Buildings insurance – this will pay for the repair or rebuilding of your house, in case there is major damage, such as a fire or falling tree
  • Contents insurance – this covers damage or loss of contents, such as furniture or jewellery, in the case of fire, theft or even accidents

Do I have to have insurance?

  • Building insurance is not legally mandatory
  • However, most mortgage lenders insist you have buildings insurance so that if your home is damaged they are not left without collateral for the loan
  • Contents insurance is neither legally mandatory, nor required by mortgage companies

Who is responsible for getting insurance?

  • If your property is freehold, the homeowner is responsible for all insurance
  • If you are in a leasehold property, then the freeholder is invariably responsible for the buildings insurance, and the leaseholders are responsible for the contents insurance
  • For more information, see Leasehold v Freehold – what’s the difference? 

Why should I have insurance?

  • For almost everyone, their home is by far most valuable thing they own, and it has taken their working lives to save up for. If your house caught fire and you aren’t insured, you could watch everything you own go up in smoke, literally
  • Without buildings insurance you will probably not be able to afford to rebuild the house, and despite not having anywhere to live, you would still have to repay your mortgage
  • There is a less clear cut case for contents insurance. If you don’t have many valuable possessions (for example, if you have just left home), or if you are sure you can easily afford to replace your possessions, then it may well be a waste of money. Many people are overinsured, paying out insurance that makes no financial sense. In general, if you can easily afford to replace something, don’t bother insuring it
  • However, if you have valuable contents (in particular, jewellery, paintings or furniture), or if you can’t afford to replace the contents, then it will be worth having contents insurance. It will certainly give you peace of mind if you are worried about burglaries or fires.

What does insurance cover?

All insurance policies are different, and so you need to look at the small print to see what is covered. But in general:

  • Building insurance covers the actual structure of the property including the floors, painted walls, and fixtures and fittings
  • Fixtures and fittings are things like radiators, baths and shower heads that, if you turned the house upside-down and shook, would not fall out
  • A standard building insurance policy will cover you for fire, wind, hail, explosion, vehicles or aircraft crashing into your home, smoke, and damage caused by criminal activity including vandalism and rioting – particularly useful in London since August 2011. It will often also cover damage from burst pipes
  • Buildings insurance will also normally cover you for subsidence, provided that your property has not experienced subsidence before
  • The building insurance policy will pay for the repair or rebuilding of your home (be aware that the cost of rebuilding your home in accordance with the current building regulations is different to the valuation of your home)
  • Contents insurance covers all the stuff inside your home: laptops, electrical goods, white goods, furniture, jewellery, pictures, and so on. Sometimes the policies also cover bicycles and phones
  • Contents insurance normally covers fire damage and burglary. It can also cover accidental damage, and even theft of things such as jewellery when you are away from home.
  • Contents insurance can either pay for replacement on a “new for old” basis (eg it will pay for a new TV, even though an old TV was stolen), or just at the market value of your things (which is generally a lot lower)

What are some common exclusions?

  • Flood insurance – if you live in a flood prone area, or have been flooded before, it is notoriously difficult to find an insurer that will cover you for risk of flood
  • Subsidence, if your property has experienced it before
  • “Acts of God” – insurance-speak for major natural phenomena such as tidal waves, hurricanes, cliff-falls and other landslides, earthquakes and volcanic eruptions. Many insurance policies exclude or limit their liability for such events
  • Acts of war and sonic booms from aircraft: so if France invaded using Concorde and your house was damaged this would not be covered
  • Frost damage

What properties are difficult to insure?

Some properties can be difficult to get insurance for, as they are not normally covered by mainstream insurers. You may end up having to go to a specialist insurer, which could cost you more. However, no property is uninsurable – it might just cost you more. Properties that can be difficult to insure include:

  • Listed properties
  • Thatched properties
  • Former council houses
  • Flats in big blocks
  • Unusual properties, such as lighthouses or converted barns

When do I need to get insurance?

  • You are usually responsible for the property as soon as the contracts are exchanged, though these are legally murky waters and the situation will vary from contract to contract
  • Most mortgage lenders will insist you already have buildings insurance in place by exchange of contracts

How much should insurance cost?

Premiums depend on a number of factors including but not limited to:

  • the value of the property
  • type of property
  • your credit rating
  • whether you have previously made any claims
  • your security situation (e.g. your types of lock)
  • the number of people living in the property
  • location of property

How do I value my house?

  • You can have a surveyor give you a “rebuilding cost estimate”
  • You can use the Association of British Insurers rebuilding cost calculator , for which you have to register for free

How do I value my contents?

The best way to do this is a bit of a hassle, but it is necessary:

  • Go through your house room by room and estimate how much it would cost to replace every single bit of furniture and electrical good, including white goods and gadgets
  • Do the same for books, CDs, DVDs, clothes, shoes, and sporting equipment
  • If you have particularly valuable paintings, silver, jewelry or antiques consider having them professionally valued
  • Add it all up together

How can I ensure I am eligible to claim?

  • If you have said you will use a burglar alarm, make sure you always put it on when you leave
  • Keep doors and windows locked
  • Do not leave the property empty for more than 45 days
  • Ensure you report any criminal activity to the police immediately
  • If you use your home as a business or as a place of business you should inform your insurers

Is it worth shopping around?

Definitely, and for two reasons:

  • there is an astonishingly large range in the premiums, and you could be paying several times more than you need to
  • many insurers quote low for new customers, and then push up their premiums every year, relying on customer inertia to boost their profits. You can avoid this by regularly getting quotes every year or two

You should speak to at least three insurers – and more if you can bear it. Do use price comparison websites, but don’t rely on them – you need to talk direct to insurers.

How do I choose a policy?

There are a vast number of policies out there, and the choice of them can be daunting:

  • You should decide whether you want to pay a high premium or a high excess – generally as one increases, the other decreases. Generally, you should go for as high an excess as you would feel comfortable paying, to keep the annual insurance fees lower
  • When comparing policies, ensure you are comparing like for like – keep a record of all the questions you ask the insurers, and try to build up a comparison table
  • Don’t feel you have to use the insurance company recommended by your mortgage company. They are almost certainly getting kickbacks and you will often be able of find something cheaper elsewhere
  • Use online comparator websites
  • Before you sign on the dotted line check they are authorized by the FSA to operate legally
  • The Association of British Insurers has a lot of useful information
  • Most importantly, read the small print

Leave a comment

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  1. Dear Denise,

    Thank you for your comments. We have made some changes to our guide to reflect these.

    Kind regards,

    HomeOwners Alliance Team

    Comment by Sophie Khan — October 5, 2016 @ 1:17 pm

  2. Sorry, just thought of another point which might prove helpful. Get your Buildings Insurance policy in place from the date on which you EXCHANGE contracts, not the date on which you complete, if you are buying a freehold property. This is because, if the seller has no buildings insurance and the place burns down, you can be forced to go ahead with buying the shell – so you need that insurance cover!

    Ask your lawyer what to do re: buildings insurance for a leasehold property – I can’t remember on this point.

    Comment by Denise — October 1, 2016 @ 6:10 pm

  3. Hi

    I’d like to make a suggestion for an additional point on buildings insurance. I think that it’s worth pointing out that the amount you insure your house for under your buildings insurance is NOT the same as the amount you paid for it, it’s the cost to rebuild it to meet current Building Regulations requirements (which may be far more costly to meet than the original building e.g. insulation costs are higher now than 20 years ago). It is always worth getting your surveyor to give you a rebuild cost estimate as part of your survey, especially if you are buying a leasehold property, to ensure that the communal buildings insurance which the landlord organises is adequate.

    I also believe that there is an error in your list of what buildings insurance covers. For flooring, carpets count as contents, so need to be insured under your Contents Insurance. They would “shake off the floor” if the house was shaken upside down. However, wooden flooring (planks or engineered wooden floors) are covered under the Buildings Insurance policy. I had water damage in my old flat, and this was the distinction which my (separate) insurance companies drew, so I ended up with a “black mark” against me for both types of insurance for having made a claim on both types of insurance, for the next five years.

    I would also query your advice about considering whether to bother to have Contents Insurance. You may, for instance, have ratty old carpets down, but if you have a “new for old” insurance policy and they get damaged, then you are covered for new carpets of equivalent quality (by which I mean that if they were 100% polypropylene, you won’t be getting 100% new wool carpets instead).

    I do agree that too many people don’t get the value of their contents properly assessed. The danger here is that, if you under-insure your Contents, then your insurance company will make some kind of adjustment (I can’t remember how they do it) to pro-rate their liability. So if you are insured for £40k (assessed as the cost of actual replacement at new prices), but you actually have contents lost in a fire and they cost £50k to replace, you won’t get the £40k, the insurer will reduce that sum.

    Comment by Denise — October 1, 2016 @ 6:02 pm

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