Contents insurance: what is it and who needs it?
Contents insurance will cover the cost of replacing or repairing your belongings if they are stolen or damaged, so you don’t have to foot the bill. Having cover is not a legal necessity, but it is a good idea. Here’s what to look for in a policy, and why you should read the small print.
More than a quarter of UK households don’t have contents insurance, yet the average value of a household’s belongings is £35,000 according to the Association of British Insurers. That is more than the average full-time worker earns in a year. So it makes sense to have this cover in place, in case of an unexpected event such as a burglary or fire.
What is contents insurance?
Contents insurance protects the belongings in your property, so if they are damaged or stolen, the insurer will pay the cost of fixing or replacing them, on a valid claim. Think of it as everything that is not attached to the building itself, and what you would take with you when you move house. It includes carpets, which are technically transportable, even if they are fitted. It can also cover what you keep in locked sheds or outbuildings.
The total amount you are covered for – called the sum insured – will be the maximum the insurer will pay out for your contents. This needs to be enough to cover the cost of replacing all your belongings after a destructive event such as a flood.
Insurers usually set single item limits for contents insurance, which can range between £1,500 and £15,000. Any items that are worth more, for example, a piano or a high-spec camera kit, may need to be listed separately, or require extra cover, so always tell your insurer.
What does contents insurance cover?
Contents insurance covers your possessions. This includes tables and sofas, TVs and game consoles, food blenders and microwaves, plates and glasses, musical instruments and jewellery, along with artworks and books. Most insurance policies will also cover cash kept in your home, up to a certain amount, but always check.
It usually also covers clothes which, considering each of us buys around 33 items of clothing each year, might add up to more than you think. Include bags and shoes, and if you have designer or vintage pieces worth more than the policy’s single item limit, tell your insurer so they can be listed separately.
A contents insurance policy will cover these items if they are destroyed by a fire or flood, or if they are stolen, up to a limit. If you want to be covered against accidents, or for loss or theft of your belongings outside of your home, you will usually need to add personal possessions cover.
Policies should also include some personal liability protection. This covers you up to a certain amount if someone makes a claim against you after being injured or damaging their belongings in your home.
How does contents insurance work?
Most contents insurance policies provide new-for-old cover. This means if you make a claim for theft or for an item damaged beyond repair, you will receive the value of a like-for-like, equivalent replacement, without wear and tear or depreciation in value being considered. If the item is damaged but can be repaired and returned to its original condition, the cost of the repairs will be covered.
However, some items with a short lifespan that you use a lot, such as clothes and bedding, may not be replaced on a new-for-old basis. Wear and tear may be considered and the payout reduced in line with that.
If you have indemnity cover instead of new for old, the replacement value will only reflect what the stolen or damaged item is worth at that time, taking into account the reduction in value and deterioration. So it might cost you £1,000 to buy a new set of dining chairs, but if those you are replacing were many years old and worn from use, the payout may only be £500. Your premium may be lower, but you will only be paid the value of the used item.
What doesn't contents insurance cover?
A standard contents insurance policy won’t cover the following claims:
- General wear and tear: If there is damage caused over time, such as frayed sofa edges and worn rugs.
- Mechanical or electrical breakdown: If your TV or fridge has stopped working because it has reached the end of its useful life.
- Unoccupied homes: If your home is left unoccupied for a long period of time, usually 30 or 60 days, and you have not told your insurer.
- Accidental damage: If you damage your belongings by accident in a one-off incident, for example, dropping a set of plates or spilling paint on a sofa, you won't usually be covered, unless you have added accidental damage cover to your policy.
- Damage caused by pets: Even if you take out accidental damage cover as an add-on, you may need to extend the cover to include damage if, for example, your puppy is chewing the legs of your antique cabinet.
- Running a business from home: If you use your home as business premises, rather than just for remote office work, known as ‘clerical use’, you will usually need to extend your cover or buy a specialist policy to cover business equipment. Tell your insurer, or you could invalidate your policy. Even if you start working remotely from home for an employer and don’t think you need extra cover, your insurer still needs to know.
Freezer contents that are spoiled after a power cut may be covered as standard, but check the policy wording and the maximum amount you can make a claim for.
Replacing a whole suite or set if only part of it is damaged or stolen is not usually covered as standard, as insurers will only pay to replace the damaged item. However, they may pay an amount towards replacing the matching undamaged items.
Do you need contents insurance?
Contents insurance is for anyone who has belongings they want to protect if the worst happens. You don’t need to have it by law, but replacing everything you own in the event of a fire would be unaffordable for most people.
Other than if you own the home you live in, here’s who should also consider contents insurance:
Whether you rent out your property to tenants or let it out to holidaymakers, if it contains any of your belongings, such as plates, sofas or freestanding white goods, carpets and curtains, that counts as contents. Standard home insurance policies may not provide the cover you need, as the risks are different. Specialist landlord home insurance or holiday home insurance can be bought as a standalone contents policy or combined with buildings insurance.
If you are renting a property, buildings insurance is your landlord’s responsibility, but protecting your belongings is yours. So you will need a standalone policy if you want contents cover. If your policy includes tenant’s liability insurance, you are also protected up to a certain amount if you accidentally damage your landlord’s belongings or fixtures and fittings.
A third of students don't have contents insurance, yet research by Save the Student found that the same amount are also victims of theft. Student contents insurance policies cover damage or theft of your belongings after forced entry, and you can add extra cover for items such as gadgets and guitars, or taking your laptop outside your accommodation.
If you are renting away from home, check whether your parents’ home insurance covers you for theft and damage, or they could add you to their policy, which may be cheaper than taking out a standalone policy. If you are staying in halls of residence, there may be a basic level of insurance in place, but check what it doesn’t cover too.
Contents insurance optional extras
Insurers will usually let you top up a standard policy with add-ons that may be important to you, such as cover for your bike or jewellery when you are out and about, at an extra cost. Policies vary, so check what is already covered first.
Some common add-ons are:
- Accidental damage cover, for belongings damaged by a one-off accident, such as a smashed antique vase or your mobile phone on a spin cycle.
- Personal possessions cover for taking items such as phones, laptops and watches outside of your home, sometimes anywhere in the world. Also called all-risks cover.
- Legal expenses cover, up to a maximum amount, covering the cost of legal representation for issues such as boundary disputes or if someone is injured in your home, as well as wider issues such as probate disputes and seeking compensation after an accident.
- Home emergency cover provides a helpline for problems with utilities such as plumbing or heating, and pest infestation. The insurer will send out an approved tradesperson to fix it and prevent further damage. If you are renting, emergencies like this are your landlord’s responsibility.
How much cover do you need?
The way your total cover amount is calculated depends on the type of policy you have.
With this type of policy, your insurer will calculate the total amount of cover based on how many bedrooms are in your property. Most offer between £40,000 and £50,000 of contents cover as standard. It is a straightforward approach, but make sure that amount covers everything you need it to cover.
With a sum-insured policy, you will tell the insurer how much contents insurance you need. This should be enough to replace all your belongings if you had to buy them as new if it is a new-for-old policy. Make a realistic estimate and don’t forget any items worth more than the insurer’s single item limit, so you can ask if they are included, or if you need extra cover.
It is a good idea to walk through each room, adding up the value of your belongings, so you don’t forget anything. Include carpets and items stored in your loft, shed or garage, too. That might feel like an effort, but you will want to avoid being underinsured.
According to research by the Association of British Insurers, one in five homes is thought to be underinsured because householders underestimate the total figure or just don’t know how much their belongings are worth. Not having enough cover can lead to lower payouts when you make a claim, and may even invalidate your policy.
This cover does exactly what you would expect: your belongings are covered with no limit to how much you can make a total claim for, so you won’t be underinsured. Just be aware that single item limits will still apply, and some claim types may have a maximum amount you can claim for. This type of contents insurance is likely to cost more than a sum-insured policy.
You should update your cover over time and review it each year. If you buy expensive items, such as jewellery or home entertainment equipment that exceed your policy’s single item limit, you’ll want to add them. That way, you won’t end up being underinsured.
How does contents insurance excess work?
The excess is how much you pay towards a claim, which the insurer will deduct from the payout. This means if you made an £800 claim for a stolen laptop, an excess of £200 would reduce the payout to £600.
Compulsory excess is set by your insurer, while voluntary excess is the amount you agree to pay on top of that. You may be charged a different excess amount for each type of claim. For example, if you are making a claim on your accidental damage cover, your excess may be higher.
If you choose a higher voluntary excess, you will usually pay a reduced premium. But you should weigh up this benefit against the reality of a reduced payout because you will need to pay this excess before your claim is settled.
How much does contents insurance cost?
The average premium for a contents insurance policy is £128, according to the Association of British Insurers. But what it will cost you depends on a few factors, including the total value of the belongings, any additions such as accidental damage or personal possessions cover, and your agreed voluntary excess.
Insurers will also consider your individual circumstances, such as where you live, bearing in mind local crime rates and flood risk. They will also look at your claims history and the level of security in your home.
You can find out the premium you could pay by comparing quotes for the cover you need. You will need to have an estimate of the total value of your belongings handy, including details of high-value items. You may also need to supply information about any claims you have made in the last five years.
Not all insurers provide the same level of cover, so read the product documents carefully, so you understand the policy exclusions and get any add-ons you need. The majority of home insurance claims are paid out, but unsuccessful claims usually occur because people don’t fully understand what they are covered for.
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Holly champions clear, jargon-free writing. She’s been creating finance content for leading organisations for over 10 years, with expertise in insurance, wills and probate, and all things health. Read more