Buildings and Contents Insurance – The Basics

Many people consider buildings and contents insurance to be one of the basic safeguards for any property owner, be it a residential dwelling or commercial property. And quite rightly so, since the insurance is designed to protect probably your biggest single investment. Without it, the property owner is decidedly vulnerable to some potentially catastrophic risks.

Just as the name suggests, however, buildings and contents insurance is in fact two insurance policies – one covering the fabric and structural integrity of the building, the other covering its contents. The two policies can be bought separately, or, as is often the case, rolled up into a single policy, when discounts are often sometimes on offer for buying the two together. What, then, are the principal risks typically covered by this kind of insurance?

Buildings insurance

Despite the common saying that something is as “safe as houses”, our homes are in fact vulnerable to the sort of major disasters that damage the property so severely that they are uninhabitable without very expensive repairs or even rebuilding. This is the sort of damage likely to be practically impossible to fund from your own resources, unless you have the protection of buildings insurance. Although policies differ from insurer to insurer, a home insurance typically covers the following basic risks:

  • fire;
  • storm damage;
  • floods;
  • subsidence;
  • falling branches or trees;
  • objects falling from aeroplanes;
  • impacts by vehicles; and
  • sometimes vandalism or malicious damage.

Further types of damage might or might not be covered by a standard buildings policy. For example, leakage of water or oil from pipes that burst in freezing weather might be included in some policies. Also included in some standard policies or as an optional extra is cover for accidental damage to fixtures such as bathroom or kitchen fittings. Cover for some types of damage – such as subsidence and flooding – moreover, might depend on whether you had accurately advised the insurer of the potential risks beforehand.

For these purposes, the building surveyor which you ought to have commissioned before purchasing the property might again come in useful for alerting your insurer to potential problems, thus ensuring that buildings and contents insurance cover remains as extensive as you believed it to be.

Contents insurance

The other half of the basic pair of home insurances is designed to safeguard the contents. Typically, this is also a considerable investment – that might take more than you are able to pay if you had to replace all the items, following a fire, say.

Because the contents of the typical home are built up over many years, however, many people might be surprised at just how valuable those contents are.

The following are some of the points you might wish to consider before arranging your contents insurance:

  • Unlike your buildings insurance, your mortgage lender is not going to insist on your having the contents of your home covered, but a careful inventory (on a room-by-room basis) of the contents of your home is soon likely to reveal the enormous cost of replacing it all if it were all to go up in smoke or damaged by flooding;
  • The typical contents insurance policy is likely to offer compensation in the event of any loss or damage in terms of the replacement value (i.e. at today’s prices) of the items lost, damaged or stolen. It is possible to find policies with cheaper premiums that pay out after a deduction for “wear and tear” of the items that need replacing according to their age, but this means, of course, that you are unlikely to receive enough to replace them at today’s values;
  • There are many variations in the extent of cover offered by one contents insurance policy compared with another. It is important, therefore, carefully to read the policy document to understand just what risks are covered and to what amount.

Buildings and contents insurance might be one of the most basic safeguards available to any property owner, but it might prove to have been invaluable, in the wake of the sort of disaster that ruins the fabric of a building or requires the replacement of all, or a large proportion, of its contents.