Home Insurance is one of the most common types of insurance policy.
It can protect your property and the items inside it.
Read on to learn about what it is and when you should get it.
Home Insurance: An overview
Home Insurance is a policy that covers homes from things such as damage and burglary.
Examples of damage may include:
- Flooding
- Fires
- Storms.
If any of these events occur, you can make a claim, and receive a payment from the insurance provider.
Types of home insurance
There are three main types of home insurance for you to choose between. These are:
- Buildings Insurance: Focuses on the property itself
- Contents Insurance: Focuses on the items inside your house
- Combined buildings and contents insurance.
What is specifically covered in each type of policy may vary for each provider. You should clarify any details with them before deciding.
Is home insurance always necessary?
Many UK mortgage lenders require building insurance.
They have an enormous financial stake in your property. And want to ensure that all money can be recovered if something goes wrong.
A lender rarely requires you to take out Contents Insurance, as they do not have a stake in your belongings.
You should clarify whether Building Insurance is compulsory for your lender. Some organisations make it compulsory, but others don’t.
If you own your house outright, you do not have to take out Home Insurance if you don’t want to.
But many insurance experts recommend that you do to protect your financial stake in the house.
Who can force you to take out Home Insurance?
Mortgage lenders
A mortgage lender can make it compulsory when lending you money. If you refuse to get home insurance, they can withdraw their offer.
You’ll then need to find another lender that doesn’t make this a requirement. But the interest rate, amongst other things, could be different.
Landlords
A landlord can ask a tenant to take out home insurance. This could be a requirement of renting a property, as stated in the tenancy agreement.
Usually, this only refers to contents insurance. But it may cover buildings insurance as well. Make sure to confirm this before you agree to move in.
Landlords must pay for their own landlord insurance.
Contents insurance vs building insurance
Whether you need contents or building insurance depends on your situation.
Building Insurance could be required by a lender. And it’s a smart idea since the house is your most valuable asset.
You may also prioritise this if your house is vulnerable to natural elements, like flooding or fire.
Contents insurance could make more sense when you’ve got valuable belongings inside your home. Especially if you’re in a high crime area that’s vulnerable to theft or burglary.
You should speak to a qualified insurance expert for more guidance on this subject.
Advantages of taking out home insurance
Peace of mind
Home Insurance can provide crucial peace of mind to a property owner if something goes wrong.
Taking out a policy may be particularly important if you are in a situation where something going wrong is more likely.
For example, suppose your location has a high risk of flooding, or storms that are extremely common in your part of the country.
In that case, the risk of living there is higher, and the need for Home Insurance may increase.
You could also feel this way if there is a high crime rate for burglary in your neighbourhood.
Ensure you can get a mortgage
Not all lenders force you to take out home insurance, but many do. You could save time by pre-empting this, and getting it right away.
This gives you access to the whole-of-market, and thus the best interest rates. Otherwise, you may be required to get an expensive mortgage.
Financial protection
Home insurance can also be an extremely practical financial exercise.
If you have items of high value in your home, then Contents Insurance will keep you protected. And the payout from the insurance policy can stop you falling into financial ruin.
Disadvantages of taking out home insurance
Regular payments
You can typically make home insurance premium payments on a monthly or annual basis.
It’s up to you which you choose. This is an added expense you’ll need to factor into your budget.
Your payout might not be as high as expected
If you need to make a claim on your insurance policy, then the payout might not be as high as you hope.
There’s no guarantee of the insurance company giving you everything possible. Sometimes, they drag their heels, and it can take a long time to receive anything.
Doesn’t cover everything
When you’re trying to put yourself in a strong financial position, home insurance doesn’t cover everything.
You may have other valuable assets that don’t fall under this type of insurance. This means you’ll need another policy to take care of it.
