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Homeowner Insurance Guide

This guide introduces you to the basic insurances associated with home ownership.

Homeowner Insurance Guide

1. Why home insurance is necessary

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Your home is often your most valuable possession and along with the building itself, the contents are usually of great personal value. Without adequate protection, one simple incident can have a devastating impact.

Home insurance can't stop the incident taking place, but it provides peace of mind that things can be put back the way they were, quickly and with the minimum of fuss.

2. Buildings insurance

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Buildings insurance covers you for damage to the structure of your home.

Mortgage lenders require that you have buildings insurance in place and that it covers the cost of rebuilding the property and the permanent fixtures and fittings inside it.

The re-build cost will be detailed on your valuation report or survey.

3. Contents insurance

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Contents insurance covers you for the contents of your home.

Unlike buildings insurance mortgage lenders do not insist on contents cover however, you should take the necessary precautions to protect yourself.

Check your single item cover in your policy, expensive individual items in your home may need to be added individually to your policy.

Some policies also offer a legal protection element - providing valuable assistance with legal costs. Others offer home assistance packages which can help with emergency repair arrangements and costs.

4. The cost of home insurance

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The cost of your home insurance premium will be influenced by a number of factors including:

  • Insured sum – the higher the insurance value the higher the premiums.
  • Location – if you live in a high risk area, your premium will be slightly higher.
  • Voluntary excess – the more you agree to pay in excess the lower your premiums.

5. Home insurance – the process

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  • Declaration - This includes the property type, state of repair, if it's in an area of risk etc. You'll also be asked for your claims history and if you have any criminal convictions.
  • Personal information – This includes your date of birth, profession, and address. You'll also be asked when the property was built, what security measures are in place, ownership and occupancy details.
  • Quote - The home insurance quote will provide cost and cover details which can be adjusted by choosing additional options such as accidental damage, legal protection and voluntary excess.
  • Buying - Once you are happy with the home insurance quote you will generally be given the option of paying upfront or by monthly instalments. On completion your full policy documents will be sent out to you by post.

6. Life cover

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Life insurance provides a cash sum for those you leave behind in the event of your death.

It is generally recommended you take out life insurance if you have a mortgage and dependents. This will provide your family with a cash sum allowing them to pay off the mortgage.

There are lots of different forms of policies including 'level term' insurance and 'whole of life'.

Level term insurance will pay a tax-free cash sum if you die within the agreed term of the policy.

A 'whole of life' policy differs from a 'level term' policy in that it does not have a restricted policy period, instead it guarantees to pay out whenever you die and is therefore more expensive.

7. Critical illness cover

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Critical illness cover provides you with a financial cash sum in the event that you are diagnosed with a serious illness or you suffer a severe disability.

This sum could help to pay off your mortgage or provide extra cash to pay for treatment or rehabilitation.

In order to be covered, the illness with which you are diagnosed must be one of those set out within the policy which may stipulate a mandatory survival period.

8. Income protection cover

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Income protection cover is designed to provide you with an income should you suffer an accident or illness and be unable to work.

The income from your protection plan could provide you with a monthly payment allowing you to meet your mortgage payments as well as provide extra money for other outgoings.

Many policies will only cover a percentage of your income.

9. Accident, sickness and unemployment cover

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Accident, sickness and unemployment cover provides a monthly payment to help you pay for your mortgage and associated costs in the event of an accident sickness or involuntary unemployment.

10. General hints and tips

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  • Read the small print so you are sure what insurance you are buying. Make sure you know exactly what is and is not covered.
  • Check whether premiums are fixed or can be increased by the insurance company every few years.
  • All insurers should give you what is known as a Key Features Document, which will give you all the important information about the policy.

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