How much contents insurance do I need?

Whether you’re a homeowner, renter, or landlord, take a moment to consider everything you own and its combined value. The total could be in the tens, or even hundreds of thousands. And, given that it is easy to undervalue what you own, imagining what it may cost to replace one, some, or even all of these items may soon add-up. This is where having contents insurance can help.

What is contents insurance?

While buildings insurance covers the structure of your home, contents insurance protects everything in it. Put simply, if it’s something you would take with you when you move home, it probably falls under contents insurance.

Contents insurance may also cover some personal legal liabilities, such as if a visitor to your property injures themselves and you are found to be legally liable for their injury either in a personal capacity or as the employer of domestic staff.

There are usually limits on the amount insurers will pay out for high-value items like art, jewellery and certain electrical equipment. Your insurer may agree to raise these limits if the items are specified (i.e., listed as individual items on your policy), though you may be asked to provide a current valuation for any items whose value cannot easily be obtained from a price list.

You can purchase contents insurance as either an individual policy or together with buildings insurance as a combined policy.

What does contents insurance cover against?

Contents insurance will usually cover for loss or damage from the following: -

• Fire damage (home fires, smoke, explosions).
• Flood damage
• Storm damage
• Theft and attempted theft
• Malicious damage (e.g., vandalism).
• Escape of water (e.g., from a leaking or burst pipe or appliance)
• Subsidence, heave, or landslip
• Fallen trees
• Impact by aircraft, or other aerial devices.

Who should consider taking out contents insurance?

Homeowners

Contents insurance provides cover for the personal possessions and appliances in your home should they be lost, damaged, or stolen. Without contents insurance, you would need to pay to replace these items entirely out-of-pocket.

Renters

If you’re a tenant, contents insurance will protect the possessions in your rented accommodation.

Most contents insurance policies will also provide tenants’ liability cover. This will pay out for the repair and replacement costs of any fixtures, fittings, or other items you damage which belongs to your landlord in the property. For example, if you spilled red wine on your landlord’s sofa, you would be covered by tenants' liability, potentially saving you from losing your deposit.

Students

For students living away from home, a contents policy can provide cover for items such as laptops, televisions, books, clothes, and mobile phones.

In some cases, students’ personal possessions may already be covered by a parents’ home insurance policy, so it’s a good idea to check before committing to a new policy.

Lodgers

If you’re a lodger and want your personal items to be covered for loss or damage, you will likely need your own contents insurance policy.

House sharers

If you’re in a house-share situation, contents insurance that will provide cover to both you and your housemates’ possessions in one policy is available. Alternatively, you can choose a policy that will only cover your possessions and no-one else’s.

A contents policy for house shares may mandate that you must be able to lock the door to your room and that your possessions are not left out in communal areas.

Landlords

If you are a landlord and are renting out a furnished property, landlord contents insurance can provide cover for the repair or replacement of any free-standing items not permanently attached to the property (such as furniture or appliances) in the event they are damaged, lost, or stolen.

How does contents insurance work?

When looking at contents insurance policies, there are two main types of cover to choose from: new for old and indemnity.

New for old cover

New for old contents insurance is designed to replace any insured personal possessions with a brand new, like-for-like replacement or full compensation.

For example, if you purchased a new TV five years ago, it will be replaced with a new TV of similar specification. This means that, even if that particular model of TV is no longer on the market, you will receive enough compensation to purchase the current equivalent or a similar item of equal value.

New for old cover is the most common type of contents cover, and although more expensive than indemnity cover, can be a better option in such events as theft, fire or storm damage.

Indemnity cover

Unlike new for old cover which is based on the original value of an item at the time of purchase, indemnity insurance pays for the current value of an insured item after considering its age, wear and tear, as well as any other depreciating factors.

For example, if you bought a new iPhone five years ago for £800, you will not be compensated with £800 to replace it. Instead, you will receive the amount it is valued at today. The current market value for that particular phone could only be around £100. This means you will have to purchase either a second-hand replacement worth £100 or pay the difference yourself for a newer model.

Because you are not being compensated for the full cost of the item you are claiming for, premiums with indemnity cover are cheaper than with new for old.

What are the differences and similarities between new for old and indemnity cover?

Put simply, new for old cover will replace your insured possessions with brand new equivalents. Indemnity cover on the other hand, pays out for items based on their current value. The depreciation of an item will be considered, and the insurer will only pay out what it would cost to buy after “wear and tear” – or what they would be worth second-hand.

For example, if you bought a new TV for £600 three years ago and your insurer calculates it would only be worth £400 now, they will only pay you that amount to replace it. You would likely only be able to purchase a second-hand equivalent model or a new TV of lower quality. Otherwise you would need to pay the difference to buy a new equivalent model yourself.

Both types of cover will have a mandatory excess to pay. This means that, in the event you do make a claim, you will need to pay a pre-determined amount toward the claim. This is designed to deter people from making a claim unnecessarily.

How is contents insurance offered?

With either new for old cover or indemnity cover, there are three ways by which contents insurance is usually offered: -

• Bedroom rated: this is where the home insurer will work out the amount of contents cover you need (the ‘sum insured’) based on the number of bedrooms in your home. These policies typically provide between £40,000 and £50,000 of cover as standard. Although this is usually enough to cover most homes, make sure it is enough for your possessions.

• Sum insured: You and not the insurer, will calculate the amount of cover you need.

• Unlimited sum insured: There is no limit to the contents covered.

How do insurers decide on the cost of a contents policy?

When calculating your contents insurance premium, there are a number of things insurers will consider, including:

• Where you live: some areas are more high-risk due to things such as crime rates, or being susceptible to events such as flooding.
  
• Value of your contents: all items you declare to your insurer. This includes higher-risk items, such as high-end art or jewellery.
  
• Your claims history: Any previous claims you’ve made with past insurers.
  
• Security measures: Some insurers will require you to have minimum security measures in place. Some may also offer discounts if your home has certain security features (e.g., a home-security system or key-locked windows and doors).

How can I calculate the value of my possessions with a sum-insured contents policy?

1. Go from room to room – writing down what you have, and check for the following: -

Floor coverings: carpets, rugs, etc.

Furniture: tables, sofas, chairs, cabinets, bookcases, bathroom suites, kitchen units, beds, etc.

Soft furnishings: curtains and their fittings, cushions, pillows etc.

Electronics: TVs, DVD Players, gaming consoles, PCs and laptops, phones, surround sound systems etc.

Appliances: fridge-freezer, washing machine, microwave, vacuum cleaners, portable heaters, etc.

Kitchen and cooking utensils: cutlery, china, glass, food and drink, etc.

Valuables: jewellery, gold and silver, cash, diamonds, clocks, watches, cameras, art, ornaments, collections etc.

Garden and DIY: Outdoor furniture, ladders, tools, paint, mowers, etc.

Linen: tablecloths, towels and bedding

Clothes: shoes, coats, suits, dresses, etc.

•  Research how much it would cost to replace all of these items with ones of similar quality, new, and at today’s prices.

For items that are of high value (such as jewellery and antiques) you may need an expert valuation.

•  Once this has been carried out, check your insurance policy to see how much the age and condition of possessions are considered. For example, many insurers will make deductions on items that will have normal wear and tear, such as clothes.

• Check to see if any policy limits apply and be sure to specify individual items that are worth more than the limits to ensure they are fully covered. This might be items worth more than £1,000 and may need to be specified individually on the policy.

•  Whenever you purchase a high-ticket item - such as a lounge suite or TV – check your amount insured and any limits that may apply and, if necessary, ask your insurer to amend your policy.

Remember: it is important to be as accurate as possible with your calculations. If you underestimate the value of your contents, your sum insured will not be enough to replace your possessions. Conversely, if you overestimate your home contents, you may end up paying a higher premium than you need to.

Contents insurance optional extras

Like with buildings insurance, there are a range of optional extras you can choose to add on to your contents policy. These include: -

Accidental damage: Insures against damage to your belonging’s that is not deliberate. For example, spilling red wine on the sofa or knocking your laptop off the table and breaking it.

Away from home cover: Provides cover for possessions you take out of the home, such as your mobile phone, watch, and laptop. Some insurers may include cover for bicycles, but others may offer this as a separate add-on.

Home Emergency cover: Offers cover for callouts for emergency repairs, such as a burst pipe, blocked toilet, or broken boiler. The insurer will select a tradesman from their panel, with the call-out fee and fixing of the issue itself covered, but not any damage it causes.

Legal expenses cover: Will usually provide access to 24-hour legal advice and will cover the costs associated with claiming compensation following an accident that was not your fault.

It may also provide cover for the cost of being taken to or taking others to court over specific legal actions such as employment or neighbour disputes. Any solicitors or lawyers you consult with will be those on the insurer’s panel and cannot be chosen independently.

Valuables cover: Provides extra protection for your high-value items, including art, jewellery, antiques and collectibles. You will need to specify these items on your policy if they are worth more than the single-item limit, and depending on the item, proof of valuation may also be required.

Frequently Asked Questions

Should I take out contents and buildings insurance together?

You can take them out separately, but it is often easier and cheaper to get buildings and contents insurance from the same provider.

What is a single-article limit?

A single-article limit is the maximum amount an insurer will pay for any individual item. The limit is usually between £1,000 to £2,000 but may be more depending on your level of cover.

If you have valuables that are worth more than the single-article limit, these will need to be listed individually on your policy. This costs extra, but it will ensure your high-end valuables are adequately covered.

If you have a lot of valuables (e.g., a specific jewellery collection), it may be worthwhile insuring these on a separate, specialist policy.

What is unlimited contents insurance?

With a standard contents sum-insured policy, you will choose how much cover you need once you have calculated the total value of your contents. Some levels of cover will cap the sum insured at a certain amount. However, some insurance providers offer unlimited contents cover (also known as unlimited sum insured). This will be more expensive than a standard contents policy but will mean that you will avoid under-insuring your possessions.