How much should you insure your home for?
In association with Barclays Bank
A good home insurance policy will protect you in the event of your property or possessions coming to harm. If you suffer a loss, your insurer will replace the goods, repair the damage or compensate you.
Thankfully, most insurance claims aren't for every possession a policyholder owns - they're for loss or damage to a part of those possessions. But you still need to make sure you are fully covered, and that means taking stock of everything you own and working out its value.
This is vital when it comes to getting the right cover for your needs. If you overvalue, then your buildings or contents insurance policy may end up costing more than it should, while undervaluing could lead to you receiving a reduced payout should the worst happen.
Your home itself
Your home is likely to be your most valuable possession, so it's vital to make sure it's properly protected. And if you have a mortgage on the property, your lender will almost certainly insist that you have adequate buildings insurance in place - while you have a mortgage, it's the lender's asset too.
But it can be tricky to work out how much to insure your home for. The insurable value is not the same as the property value - after all, if your home was razed to the ground, the land would still exist, and this makes up a significant proportion of its value. What you need to insure is known as the ‘rebuild cost' - the amount a builder would charge to rebuild your home from scratch.
Of course, this isn't the sort of thing most people know, but thankfully there are places that can help. If you have recently moved into your home, it may be worth checking any surveys that were carried out as part of the buying process. While not all surveys will include a rebuild cost, some do. You could also hire a surveyor to estimate the rebuild cost for you. While this will involve added expense, it could be a sensible option if you have an unusual home and want to make sure you are fully covered.
But if you live in a standard property, the Association of British Insurers has this handy calculator which will give you an idea of the rebuild cost of your home.
Your home's contents
Contents insurance should cover everything that can be removed from your home. So to get an accurate figure for the amount you need to insure, tot up the replacement value of everything you own.
While it's easy to remember the big ticket items, such as televisions or sofas, there are other areas that consumers can often miss. Don't forget your clothes, CDs or even books, as their total value can really add up.
Some insurers are now making it easier for homeowners by providing a blanket cover that insures your home and contents up to a certain value. In some cases this is calculated on the number of bedrooms you have, while others provide insurance for properties worth up to a certain amount.
While this is a much easier way of taking out the right home insurance, remember that you must tell your insurer if you have any particularly valuable items. Often, insurers will ask you to specify any items worth over a certain amount before they are covered.
The information given in this article was correct as at 20th April 2010. It does not, however, take account of any changes in regulations, the law or interest rates since that time.
This article is not a substitute for obtaining professional advice from a qualified person or firm.
Examples given of products and services are not exclusive. Other companies may provide the same products and services, and inclusion of a product or service should not be taken to indicate that Barclays recommends it over any similar product or service.
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