Contents insurance covers, well, the contents of your home, which sounds pretty straightforward. But choosing home insurance with the right contents cover can be a little more complicated than that. Policies vary widely. So how do you make sure you get an insurance policy that will give you the cover you need, without spending more than you need to?
Choosing home insurance
Most people buy a home insurance policy that covers both contents and the building. However, it is effectively two policies in one, so it’s worth understanding how each element works. The contents part of the policy will normally cover anything that you wouldn’t (reasonably) take from your home if you were to move.
Contents cover should include:
- Furniture; including free-standing kitchen units, but not ones that have been fitted
- Carpets; even when they are fitted and you would be unlikely to take them with you. Although ceramic or slate floor tiles would not be covered
- Unassembled items (such as a greenhouse or conservatory) if they are stored in your garage or home. Once they’re assembled they would be covered under buildings insurance.
What to look for
Insurance companies can settle claims in a variety of different ways, which is called the ‘basis of settlement’. It could mean you get a new item if your existing one is damaged. Or you could only get a percentage of the item’s value.
Insurers can pay out:
- On a new-for-old basis, which means most items – except for clothing and linens – will be replaced with new ones. This is what the vast majority of insurers do.
- On an indemnity basis, which means that for each claim, money will be taken off the amount you receive to take account of wear and tear.
Payment by voucher
Increasingly, a number of insurance companies have arrangements with their own suppliers and retailers. This means that rather than giving you cash to replace items that have been damaged, you’ll be given a voucher to spend at a limited range of retailers. But not all insurers take this approach. If, for example, your carpet was ruined, you might be offered:
- A replacement carpet of a similar standard from a list of preferred retailers. The insurer buys the carpet at the wholesale price, so it costs them less.
- A voucher. You don’t have to use the voucher to buy the same item as the one that’s been damaged or lost. However, you can only spend it at the shops specified by the insurer. Some insurers try and get you to accept a voucher. Even when they don’t stock the item you want to replace. This may be against the rules.
- A cash settlement. Some insurers will offer you cash and give you the choice of buying the item that’s been damaged from wherever you want to.
Matching sets and suites
When is a three-piece suite not a three-piece suite? When you’re an insurance company, of course! With some policies, there’s no matching set cover. This means that, if, for example, a chair that’s part of a three-piece suite is damaged but the rest of the suite is OK, the insurance company will only pay for the chair to be repaired or replaced. This applies even if you aren’t able to buy a matching chair (perhaps because the style has been discontinued). Others take a different view and include ‘matching of items’ or ‘matching sets’ cover.
SAVVY TIP: Some policies will sell matching of items cover separately. Check the policy documents or ask your broker or insurance company to see how it treats matching sets and suites.
Will the insurer pay up?
When you’re shopping around for a contents policy, the one question you want to know the answer to is the hardest to find the answers to — namely, what is the company like when you have to make a claim? However, you can do some research of your own:
- If you’re using an insurance broker, they should volunteer to tell you what an insurer is like when it comes to settling claims. They should definitely warn you if there are any problems that you should be aware of (e.g. the admin is a bit slow).
SAVVY TIP: The advantage of using an insurance broker is they should look through all the small print for you and recommend the best policy. They will also help you with your claim if your insurer won’t pay. However, not all insurance brokers are as good as they should be and some work with quite a restricted panel of insurers. Find an insurance broker on the BIBA (British Insurance Brokers’ Association) website.
- If you’re using a price comparison site, look at customer reviews, search on the site’s forum to see what others have said or Google the company. I normally find that typing in the company name and ‘complaint’ or ‘problem’ is enough to do the trick.
SAVVY TIP: You can find out if an insurer has a high number of unresolved complaints to the Financial Ombudsman Service, which is a free adjudication service for consumers. You can also find out if the Financial Ombudsman Service found in favour of the consumer most of the time (which might suggest the company was trying to wriggle out of complaints). It publishes and updates complaints figures every six months.
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