Home insurance comes in two main forms, Buildings insurance and / or Contents insurance and can be a combined policy which covers both the Buildings & Contents.
Nearly all lenders insist that the property is covered for its full reinstatement value by a suitable building insurance policy as a condition of the loan (as the property is the security). Reinstatement value is the cost of restoring the property to a condition that is no better or not worse than the existing condition, including the cost of demolition (which may be needed after fire for instance), clearing the site, and surveyors’ and architects’ fees. This valuation may be more or less than the market value of the property.
Building Insurance has to be in place by exchange of contracts (or conclusion of missives in Scotland).
Buildings insurance covers the cost of repairing or rebuilding a home should it be damaged or destroyed through fire and natural risks such as flooding. The cost of this cover is normally very competitive unless you live in an area prone to natural disasters such as flooding which has become a serious issue for affected homeowners.
Home Contents Insurance
This type of insurance is not compulsory as a lender will not insist that the contents of the property are adequately insured.
Contents insurance covers the items in the building such as your furniture, electrical equipment and personal belongings. Normally contents insurance covers your items not only in the home but items which are on you too such as clothes and jewellery. Policies can also cover fine art, wine collections, garden items, bikes etc. but each may be subject to additional premium and if you have any especially valuable items (normally over a minimum limit) they should be listed on the proposal form to ensure they are covered. Insurers may ask for proof of purchase or a valuation for these valuables.
Many insurers cover the cost of replacing locks if your keys are stolen. Most policies may be extended to cover accidental damage or loss of valuable items you frequently take out of your home, such as jewellery, cameras and sports equipment. This is known as an 'all risks extension'.
Many people underestimate the value of their home contents. To get a clear idea of the sum to be insured, go through every room - including the loft, garage, cellar and shed - and write down what it would cost to replace every item at today's prices.
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