In addition to dealing with the potential trauma and distress of a major incident at home such as a fire, flood or burglary, imagine the horror of discovering your home contents insurance cover just wasn't enough.
Home insurance cover is vital for homeowners but many may be underinsured. That could mean a large shortfall in a rebuilding or repair bill if disaster struck and a property was badly damaged or destroyed, or that the cost of fully replacing household contents won't be met.
Building insurance and contents insurance are the two separate elements of home insurance cover. Anyone with a mortgage will be required by their lender to have buildings insurance. Contents insurance for homeowners, or tenants in rented property, isn't compulsory but it is extremely unwise to disregard taking out contents insurance.
Buildings insurance covers damage to the structure of your property. In addition permanent fixtures such as toilets, baths, fitted kitchens, fitted bedroom cupboards and interior decoration are covered. Underground drains, pipes and cables between your property and the mains supply are also included. Outbuildings such as garages and greenhouses are normally covered but fences, gates, driveways or boundary walls may not be. Always check the small print to understand what's covered and what isn't.
Home insurance cover protects against several different risks including fire, earthquakes, lightening, subsidence, theft or attempted theft and falling trees. Check the policy for a full list.
It is the responsibility of the policyholder to make sure that the 'sum insured' is adequate to cover the cost of a potential disaster – that could be anything from a fire destroying a home and its contents, to a burglar breaking in and taking all the valuables. The sum insured is basically the maximum amount of money that the insurance company will pay, so it's important that it's enough to potentially replace all the contents and completely rebuild the property.
Some insurance companies set amounts on their policies, say up to £500,000 for buildings and £40,000 for contents. It's then up to the policyholder to check and ensure that those amounts are enough to cover their situation.
Half a million pounds to rebuild a house may look as if it is an enormous sum of money but depending on the type of property owned – a detached barn on a prime plot, compared to a two-bed terrace – that sum may be woefully inadequate.
Similarly, take a good look around your home and start adding up just how much it would cost to replace everything in it. A £40,000 budget sounds great, but might not go very far to kit out a family home with brand new furniture, carpets, clothes, jewellery, sports equipment, curtains, electronic equipment, CDs and DVDs and children's toys.
If the amounts offered by the insurance company aren't adequate, don't be tempted to save money on the cost of the policy by accepting them, instead increase the amounts of the sums insured. It will cost more, but not as much as it could cost if the worst happened.
The Association of British Insurers has a guide to typical rebuilding costs and also an online calculator to help work out the correct figures. Remember the cost to completely rebuild a property isn't simply its market value.
Another factor to take into account is that insurers normally set limits on high value items such as antiques, paintings or sometimes electrical equipment. Anyone owning goods with a high individual worth needs to check the limit and talk to the company about the possibility of raising it. The items may also need to be individually listed on the policy and have a valuation certificate.
Check if home insurance cover includes accidental loss or damage to personal possessions that have been taken out of the home. This could include an engagement ring, camera, watch or laptop. Again, there is likely to be a limit on the value of any one item. It could be a good idea to add it to the policy, or it may be better value to shop around and find home insurance cover where it's already included.
Home insurance cover needs to be regularly reviewed. Over the course of a few years replacing the shabby sofa with an expensive three-piece suite, buying a new telly and getting the kids a laptop might easily exceed the limit of the sum insured in the contents policy. The insurance company also needs to know about any structural changes to a property such as a new extension.
Depending on your circumstances the cheapest home insurance cover may not necessarily be the best option, so examine the policy carefully. A more expensive but more comprehensive policy that's tailored to your individual needs could well be worth the money.