What is Covered?
A contents policy covers just about everything you would take with you if you moved. Furniture, furnishings, household goods, kitchen equipment, food and drink, televisions, video, computer and audio equipment, clothing, personal effects, and valuables up to stated limits. Boats, caravans and motor vehicles are usually insured separately.
Most policies cover loss or damage to your possessions, while in your home, by:
- Escape of water from tanks, pipes, washing machines or dishwashers
- Leaking oil from heating systems
- Heave or landslip
- Falling trees, aerials or satellite dishes
- Riot or malicious acts
- Impact by aircraft, vehicles or animals
Many policies include accidental breakage of mirrors, glass tops to furniture, ceramic hobs and fixed glass in furniture.
Some policies cover accidental damage to televisions, satellite receivers, videos, home computers and audio equipment. You can often extend your policy to cover accidental damage to all of the contents in your home.
Only limited cover applies to any contents temporarily removed from your home.
Personal belongs or Personal Possessions
Policies can be extended to cover accidental damage to or loss of items which you may take out of your home. This extension can cover such items as clothing, jewellery, cameras and sports equipment. Cover can also be arranged to insure food in your freezer, personal money and credit cards, pedal cycles and legal expenses.
Exceptions and Exclusions
These explain what your policy does not cover, to be sure about these you must read your policy which, after all, is a legal contract. If there is anything you do not understand, ask for an explanation.
Common exclusions are theft if you have let or sub-let your house (or part of it) unless there is forced entry: wear and tear and your cover will be restricted if you leave your house unoccupied for long periods.
There are usually limits on the value of any works of art, ornaments or jewellery and sometimes on high value goods like video equipment. Insurers may agree to raise these limits and you may be asked to provide an up to date valuation or receipt.
You may be required to pay the first part of a claim yourself – this is called an excess. Excesses are applied to a range of claims. Check these when you buy your policy and at each renewal date.
Some insurers allow a premium discount if you volunteer to accept an excess on all claims no matter how they are caused. The level of discount will increase with the size of excess you choose.
Your policy can be either “replacement as new” or “indemnity“.
If you have a replacement as new policy you will be paid the full cost of repairing damaged articles or the cost of replacing them with equivalent new articles if they are stolen or destroyed.
With an indemnity policy, a deduction will be made from your claim payment to account for wear, tear and depreciation.
Most home contents can usually be insured on a replacement as new basis but not clothing and household linen. What you can insure under “replacement as new” varies between insurers and sometimes age limits apply. Remember to check your policy carefully.
The sum insured is the total amount of money for which your contents are covered. It is the most your insurers will pay, even if your possessions are totally destroyed – say by fire or explosion. You must insure your contents for their full value. Some policies say that if you are under-insured, claim payments will be reduced. So remember, if your sum insured is too low you may have to pay out yourself to put things right. It is your responsibility to get the sum insured correct.
Read the following comments and use the chart to work out the full value of your home contents.
Go from room to room, not forgetting the loft, garage and shed, writing down what it would cost to replace every item, new, at today’s prices.
Even with a replacement as new policy, you should deduct, from clothing and household linen claims, an amount for wear, tear and depreciation. A man’s suit, for example, is reckoned to have a life-span of around five years. For each year you have had your suit you should deduct one fifth of today’s price of a new one. This is only a guide – the quality of property and its general condition will usually be taken into account.
Where it is difficult to establish the right figure – for example with valuables or antiques – an expert valuation may be necessary.
If index-linking applies to your policy, the total is the sum insured you need. If your policy is not index-linked, add an amount for inflation during the year to come.
You may, of course, have other rooms and possessions not listed here.
Keep Up To Date
Make sure that your sum insured stays up to date. Many insurers help by linking your sum insured to the Retail Price Index (RPI). Your sum insured is automatically changed each month in line with the Index. There is no charge for any increase between renewal dates.
Remember two important points. First, index-linking can work properly only if your sum insured is correct to start with. If not, index-linking will make your original error worse. So be certain your sum insured is correct now. Review it every few years. If your policy is not index-linked, review it every year.
Second, remember to tell your insurers to increase the sum insured if you add to your possessions – perhaps by buying an expensive suite of furniture or CD player.
Keep receipts and valuations – these can be very helpful if you need to claim. Take photographs or videos of valuables and keep them with your policy.
When buying your insurance do bear in mind:
- Some insurers operate no-claim discounts on renewal of the policy
- You can get various discounts such as age related, if certain security is installed or if you pay the first part of the claim
- Premiums vary between insurers so it pays to shop around.
If you suffer loss or damage your policy can put things right. It cannot however compensate you for distress and inconvenience. So do everything you can to prevent the worst from happening.
Make every effort to prevent theft from your home. Some insurers will offer a premium discount if you have an agreed level of security.
Insulate pipes and tanks and make sure that your main water stop valve operates easily and that the family all know where it is.
Remember, if you need advice on your policy you should consult your insurance adviser. Many insurance companies also include help lines which offer assistance in the event of a domestic emergency and free legal advice.
There are other valuable aspects to the cover given by your contents policy.
Alternative accommodation – if your home is so badly damaged that you cannot live in it until it is repaired, your policy will pay towards the reasonable cost of alternative accommodation. The payment can be as much as 20% of your sum insured.
Your legal liabilities – if, as occupier of your home you cause injury to someone or damage his or her property, your policy will pay the damages for which you are legally liable – up to £1 million plus costs in most cases.
You and your family are usually covered, up to the same amount, for liability in day to day life. For example as a pedestrian you may cause an expensive road accident.
As tenants – many policies provide some cover for your liability for damage to the building.
This document is reproduced with the permission of ABI – The Association of British Insurers.