Money Advice Service

Buying contents insurance? You need to make sure you have got just the right amount of cover – too much cover and you’re paying more than you need, too little and your insurance company might not pay out if you need to claim.

Types of contents insurance policies

There are three main types of policies available in the market:

  • ‘Bedroom rated’ –The insurer works out the amount of contents cover (or ‘sum insured’) based on the number of bedrooms you have. The advantage to this type of policy is that you don’t have to work out how much insurance you need. Most policies which are bedroom-rated provide between £40,000 and £50,000 of cover as standard. This is usually enough for most houses, but make sure it’s enough to cover your possessions.
  • ‘Sum insured – You have to calculate the amount of contents cover you need.
  • ‘Unlimited sum insured’ – All your contents are covered without limit so you don’t have to worry about being underinsured.

You can decide which type of policy you prefer.

However, you need to be aware that if you use a comparison site you might not get a choice – the site will ask you how much contents cover you want and will pick policies which offer this.

What’s the right level of cover?

Contents insurance covers everything that you would take with you if you moved home.

If you don’t have a ‘bedroom-rated’ policy or ‘unlimited sum insured’ you will need to calculate the amount of cover you need. You can do this in two ways:

  1. Use one of the many online contents calculators so you can add up the replacement value of everything you need to cover.
    Find a contents calculator on the Hiscox website
  2. List everything that you own and add up what it would cost to replace every item at today’s prices.

Be aware that for clothing and household linen – like sheets and towels – the value should be adjusted downwards to take account of wear and tear.

Insuring ‘valuables’

You need to check your insurer’s definition of valuables as this can vary widely. Then you need to check the ‘single article limit’ which is the most the insurer will pay out in the event of a claim.

For many contents policies this is around £1,500, (although for some insurers this can be as high as £15,000).

So if you have an engagement ring, or a valuable worth more than the single article limit, you need to tell your insurer about it (and you’ll probably pay a bit extra to get it covered).

  • Tell your insurer what high-value items you have
  • Provide proof of purchase (and value) if they ask you
  • Check that they are correctly listed on your policy document

Generally, for all other contents the single article limit doesn’t apply.

Insuring mobile phones, laptops, iPads and other portable devices

With some contents policies you’ll be covered for the things you take out of the home such as your phone or your laptop.

However, you need to check that you have the cover you need.

Your standard cover might include the cost of replacing your mobile phone handset or your laptop, but you’ll need to check whether it covers things like music downloads on your phone or the files you’ve saved on your computer.

Some policies include cover for digital information so it’s worth checking.

Most polices won’t cover you if these items break down. And a standard contents policy won’t typically cover any money you lose if someone steals your mobile phone and runs up a huge bill.

Some insurers will offer you an ‘all risks’ option, usually for an additional premium, which will offer wider cover, and include – for example – accidental damage to your things.

Don’t be tempted to underinsure

Get enough cover to replace all your possessions. If not, you could be in for a nasty shock because your insurer might reduce the amount they pay out, even if your claim is only for one or two items.

For example:

  • Say your possessions are worth £40,000, but you only insure them for £20,000
  • You’re burgled and you lose your TV, sound system and two laptops, which are worth a total of £5,000
  • You then make a claim
  • As your total contents insurance cover is half what it should have been, your insurer could reduce your total claim payment by half which means you only receive £2,500 for the items you’re claiming for

Types of cover

There are two different kinds of cover available, both of which have an effect on the price of your premium.

Look out for:

  • New for old – You’ll get paid what it costs to replace the items (other than clothes, where there’s usually a deduction for wear and tear). Most policies offer this.
  • Indemnity cover – You’ll only get the current value of your possessions so, if your sofa needs replacing at a cost of £2,000, you will only get what the old one is worth which might be £200. Even though your premium will be cheaper, it could be a false economy.

Additional options, include:

  • Legal cover to pay for court costs
  • Accidental damage for things such as paint spills on your carpet
  • Home emergency cover for plumbing, heating and other emergencies
  • Personal possessions cover – which covers things like wallets, jewellery, and laptops that you take outside the home

If you work from home: check whether cover for business equipment is included as standard or an optional extra.

If your ‘home’ work is more substantial than clerical work.

For example, you have people visiting your home - you’ll probably need more extensive cover, which you can get from a ‘homeworker’ policy.

Speak to your insurer and discuss the type of work you do.

Things to check for when comparing policies

Different insurers will provide different levels of cover in their policies.

So keep an eye out for where the differences lie and make sure you get the cover that you need.

We’ve put together a list of things to check for when buying contents insurance.

Defaqto gives stars from 1–5 to rate the cover levels of different policies from different providers.

Keeping your contents policy up-to-date

You need to make sure you keep your insurance company up-to-date with your circumstances.

So if, for example, you splashed out on some antiques, electronics or jewellery that are worth more than your single item limit on your policy you should let them know.

Likewise, if you’ve made a series of major purchases which means you need to increase the sum insured.

For example, if you replaced a lot of the furniture in your home then you might need to increase the total sum insured.

Many standard policies do not insure people who have a lodger, so if you take in a lodger you need to let your insurer know.

Not disclosing this information could invalidate your policy.

This article is provided by the Money Advice Service.