Your home is now probably your biggest asset, so adequate protection should be top of your to-do list. The Association of British Insurers (ABI) explain what types of insurance homeowners need and what options they should consider -
Words Malcolm Tarling

Moving into your first home, whether it is a small flat or a family house, is one of those momentous life-changing moments – exciting but a daunting prospect. Suddenly a whole new world of financial commitment opens up, as this is likely to be the biggest financial purchase you will ever make.
And hand-in-hand with this comes a mortgage that you need to ensure you can repay, especially if you suddenly lose your income, as well as a home and possessions to protect against unwelcome and sudden events, such as a flood, fire or burglary.

All this makes the need for insurance vital, so that should an unwelcome event occur you can then carry on financially. Without it your home and your family’s security are in jeopardy. But how can you be sure that you have the protection that you need? Understanding the types of insurance available is an excellent starting point, but if in doubt, always seek expert advice from an insurance broker.

Types of insurance
Whether you are buying your first home, or are already on the property ladder, there are some basic insurances you should have or seriously consider.

Buildings insurance
It will be the biggest financial purchase you are ever likely to make, so it makes sense to protect your home against being damaged. Buildings insurance typically pays out for damage to your home by fire, flood, storm, explosion, subsidence and accidental damage, as well as the cost of temporary accommodation if you have to move out while your property is uninhabitable while being repaired.

You will need to ensure that the policy covers the full rebuilding cost – not the property’s market value. Your lender or a chartered surveyor will advise you on the right figure. Your mortgage lender will probably require you to have buildings insurance as a condition of the mortgage.

You can buy the cover from them as part of the mortgage deal, or shop around and get it elsewhere.

Essentials
How to claim – the three golden rules
Insurance is there to give you financial support if the worst happens. So if you need to claim, it is important that you know what to do.
Read the policy
To start with, when you receive the policy document read it to know exactly what you are covered for, any limits or exclusions, and the steps you need to take to claim. For example, if you have been burgled, you will be expected to notify the police as soon as possible. And if anything is unclear, talk to your insurer.
If you need to claim, tell your insurer as soon as possible
As soon as you think you need to claim, tell your insurer. The sooner they know, the sooner they can get your claim moving. If, for example, your home has been damaged by a flood or fire, arrange any temporary repairs to stop the damage getting worse. Home buildings and contents policies will include a 24-hour emergency helpline service to give you advice and information.
Provide as much information as possible
The more details about the loss, and what you are claiming for that you can give your insurer the better. Where claiming for lost or damaged items, wherever you have them, provide receipts and any valuations to substantiate your claim.

In these uncertain economic times, people are understandably anxious about their financial security. While insurance cannot guarantee that you will not suffer financial setbacks, it can ensure that any unexpected and unwelcome events will not leave you struggling financially. Insurance is one of the very few products that you buy hoping never to have to use. But if the worst happens, it will turn out to be one of the best purchases you ever made!

Contents insurance
Many people have little idea how much their possessions are worth, and there’s a risk of underestimating their value. Contents insurance covers your possessions against loss or damage from a variety of risks, including fire, flood, storm, explosion and burglary.

Everything that you would expect to take with you when you move should be insured, ranging from free-standing furniture, and electrical equipment to your clothes, jewellery and other personal possessions. You should be insuring for the full replacement cost, as policies pay out on a new-for-old basis. So you will need to calculate how much it would cost to replace your possessions at today’s prices. Insurance companies and insurance brokers can help you in assessing the sum insured. You can also cover your possessions when you are away from your home, and against accidental damage. Watch out for any limit on a single item or collection of valuables. If you have items worth more than these limits, then you should declare them separately to the insurer, who may need to charge an extra premium, depending on their value.

Protecting your income
The sudden loss of all or part of your income can cause severe financial hardship. Ask yourself the question: how would my family and I cope if I lost all or a significant part of the family income tomorrow through illness or redundancy? In these uncertain economic times, never has the need to protect your income been more important.

Mortgage payment protection insurance
This type of insurance will pay your mortgage repayments if you are made redundant or suffer a serious accident or illness that prevents you from working. Policies will usually pay for a maximum period of up to two years. Income protection policies can cover loss of income for a longer period, normally up to age 65, should you be struck down by a serious illness or accident that prevents you from working.

Payment protection insurance
Payment protection insurance can help by paying other loan repayments for a limited period, should you lose your job or suffer a serious accident or illness.

Private medical insurance
Rather than a replacement for the NHS, private medical insurance enables you to have treatment at a hospital and time that is convenient for you.

Critical illness insurance
Should you suffer or be diagnosed with a specified serious illness, such as cancer, stroke, or heart attack, critical illness insurance will pay out a cash lump sum.

Life insurance and pensions
With dependants, life insurance is vital. As well as helping you save for the future, it will provide your dependents with a lump sum to help them cope financially on your death. Although it may seem a long way away, it’s worth thinking how you will have sufficient income to enjoy your retirement. The sooner you make pension arrangements, the more money you will have to enjoy in your later years. You may already be in a company pension scheme, or may have made your own arrangements if, for example, you are self employed. But moving house is a good time to review your arrangements, or make some.

Working from home?
If you work from home, either full or part-time, you may need to take out a separate policy as many home policies do not automatically cover loss or damage in connection with business use.

Getting covered
While moving might be your number one priority, arranging your insurances should be number two. It might seem like extra hassle but it is possible to arrange cover quickly and conveniently.

For example, you can take out buildings and contents insurance from your mortgage lender. Buildings insurance is often an integral part of the mortgage loan arrangement, and while your lender will usually insist that you have it, you can always shop around and arrange cover with another insurer. Your lender may also offer contents insurance, but always check the market in case there is a better deal elsewhere. There are plenty of online comparison sites that will allow you to easily compare price and coverage and some of the major supermarkets and retailers sell insurance policies. However, don’t just buy on price. It’s always tempting to go for the cheapest quote, but it could have more restricted cover and lower limits. While this might suit you in some cases, in others it may not. Look at the different policies available to you and ensure you choose the one that gives you the cover you need, and as the market is quite competitive, there are opportunities to secure some good deals.

If you’d prefer someone to assist you, an insurance broker can provide invaluable help. Their job is to shop around the insurance market to get you the best deal and assist if you have any particular requirements, ie a high level of valuables or special collections. In cases such as these their expertise is invaluable. When it comes to sorting out your life insurance and health protection needs it is important to get independent financial advice. Protecting your family is a long-term commitment, so it is important that you get it right – particularly as your circumstances are likely to change, as you get older.