Am I obliged to have home insurance?
There is no legal obligation to protect either your home or its contents against the risks of loss or damage – although, given their likely value, it is clearly a prudent course of action.
If you are buying your home with the help of a mortgage, your lender is almost certain to insist that adequate building insurance remains in place at all times. This is to protect the mortgage lender’s financial interest in the building, so it might reflect only the outstanding amount of the mortgage to be repaid, rather than the current market value of your home.
Therefore, it is necessary to review and re-evaluate the total building sum covered under your home insurance on a regular basis.
Are there different types of home insurance?
Home insurance may take one of three basic forms:
- building insurance – which protects the structure and fabric of the building itself against loss or damage;
- contents insurance – which protects the contents against theft, loss or damage provides compensation reflecting the cost of replacing damaged items as new or after the deduction of an amount representing wear and tear (the latter therefore being the generally cheaper option); or
- combined building and contents insurance – a combination of both building and contents insurance, which typically offers a cheaper home insurance solution than buying each one separately.
How much does it cost?
Given the likely investment you have made in buying and equipping where you live, you might consider the cost of home insurance good value for money by comparison.
The amount you pay of course depends on the amount that needs to be insured. The total sums insured typically anticipate a worst-case scenario in which everything is destroyed (through a catastrophic fire, for example) and the building itself needs to be reconstructed from scratch. The contents, too, need to be valued according to the cost of replacing every item in the property.
Can I renew my home insurance from one year to the next?
If you already have home insurance, your current provider is almost certain to send an annual renewal letter. Some insurers may even suggest that you allow the current insurance to be renewed automatically.
The Money Saving Expert (for one) cautions strongly against any such auto-renewal, suggesting instead that you take the opportunity to review any existing cover, amend it as necessary and take advantage of better deals that may be available elsewhere in a keenly competitive insurance market.
This is especially true at a time when insurance premiums generally appear to be increasing – in no small part because of the recent increases in Insurance Premium Tax (the standard rate of which now stands at 12% of the cost of the premiums and is double the 6% tax posed in October 2015).
The cost of the average home insurance policy in the UK increased by some 8.5% in the 12 months to October 2017, said Which? magazine on the 6th of December, when it also tracked some of the regional differences in premiums across the country.