Home insurance covers the building and contents of where you live or it can just cover one or the other. Generally if you have a mortgage you will be required to have both and if you are a tenant you will normally be required to have just contents insurance.
During this section we will explore both types of insurance and treat them as two separate issues:
1) Building Insurance.
There are several factors that will affect your home insurance premium. The first is the location of your property in particular if you live in a flood damaged area. Also the construction of your property e.g. concrete is looked upon less favourably by insurers than brick. Flat roofed buildings are also less desirable to insurers.
The final area that may affect your home insurance policy is the rebuild cost. It is important to state an accurate cost for rebuilding your property in the event of it being destroyed by unpredicted event e.g. fire. You should also consider that the most expensive part of a property in some cases can be the land that the building is built on. This is unlikely to be destroyed unless there is subsidence.
For this reason you can save on your insurance by reporting an accurate cost of rebuilding your property that is lower than the purchase price of the property.
2) Contents insurance.
This is an area where you may be tempted to underestimate the value of your personal belongings. Remember you should insure your personal possessions for the cost of replacing them i.e. what would they cost if you had to go our and buy them today and replace them? This is not the same as what the market value is for them. You do not want to sell them and you want them replaced in the event of a fire or some other unpredictable event, so you need to insure them for the replacement value.
Contents home insurance also usually includes other areas of cover e.g. burst pipes etc as standard.
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